The Finance Bill 2012 introduced new rules into the Capital Allowances Act, and some of these apply from 1 April 2014.
The Transitional Period – April 2012 to March 2014
The first changes took effect from 1st April 2012.
• Where a commercial property has been purchased by the Vendor before April 2012 and is being sold after 1 April 2012 without capital allowances having been claimed on any of the fixtures or integral features within the property then the legal position remains unchanged.
• That means that the Purchaser may make a capital allowances claim for qualifying fixtures and integral features based on “a just and reasonable apportionment” of the purchase price.
Where a Capital Allowances Claim has been made by the Vendor or a previous owner
Where there has been a prior claim for capital allowances by the Vendor or any previous owner then the capital allowances position is different:
• The level of available capital allowances needs to be agreed between the two parties (by making a “Section 198 Election”).
• The s198 Election does not have to be signed before completion, it does have to be signed before two years has elapsed from the completion date.
• A failure to agree the allocation within the two year time frame will result in capital allowances not being able to be claimed by any subsequent purchaser.
From 1 April 2014
Where a property is being sold on or after 1 April 2014 by a Corporation Tax payer or after 5 April 2014 by an Income Tax Payer the issue of dealing with capital allowances becomes stricter:
• If the issue of capital allowances is not dealt with before completion the Purchaser and any subsequent purchaser will lose the right to claim capital allowances.
• The Vendor must pool the capital allowances before they may be transferred to the Purchaser by means of a signed S198 Election Agreement (as above).
• If a full capital allowances has not been made by the Vendor, this may mean that a full capital allowances claim needs to be made prior to the sale.
• Where the issue is not dealt with prior to completion the right to claim capital allowances will have been lost. This could well have an effect on the future value of the property when the Purchaser wishes to sell the property in the future.
Reviewing Capital Allowances
Property owners may wish to review making Capital Allowance claims for commercial properties, so that they are able to benefit from allowances themselves and to pass on any remaining benefit to maximise the property value to purchasers in the future.
For more information on how to access specialist capital allowance reviews please contact Leanne Hathaway.
Leanne is a Chartered Tax Adviser, specializing in advising on UK tax matters but also including overseas tax as needed. Leanne is head of Taxation Services at EHL Solicitors in Leicester.
The information provided in all of our blogs reflects only a narrative of some elements to consider on the topic. The blogs do not contain considered legal advice and should not be relied upon as advice. Please see our website terms and conditions for full details of our disclaimer. If you are interested in obtaining advice, please contact one of our lawyers who will be happy and able to advise you on your own particular circumstances.