Claim capital allowances for the cost of fixtures when purchasing a commercial property.
The question is whether or not these capital allowances will be available and the amount of the capital allowance on those fixtures. This will depend upon what action has or has not already been taken.
The purchaser’s entitlement to capital allowances is restricted to the disposal value that the past owner of the property bought into account. Therefore it is the responsibility of the purchaser to obtain and provide details of prior claims and disposal values.
New rules came into effect in April 2012 and there is a transitional period for certain elements of the new rules up to April 2014.
The availability of capital allowances for the purchase of fixtures is dependant upon:
- Previous expenditure on fixtures being pooled at any time before a sale (pooling is not applicable for expenditure incurred during the transitional period from April 2012 to April 2014); and
- The seller and purchaser either jointly electing a figure and apportioning the same up to the original cost of the fixtures or using the first tier tribunal proceedings to agree the value within two years of the sale; or
- In exceptional circumstances providing a written statement of no disposal value.
The consequences of not pooling the capital allowances in time is that no capital allowances will ever be available to a purchaser or any future owners of the property. Therefore similar properties could have two different values, if a purchaser is able to obtain capital allowance relief on one property but not the other.
Also the question of capital allowances must be addressed early to avoid any delay in the transaction proceeding.
Therefore any seller of buyer should get specialist capital allowance advisors and accountants involved as soon as a disposal or purchase is contemplated. This will enable the correct information being available to the professional advisers and that the best value is obtained for the property and the transaction proceeds on a timely basis.
Parties should take a proactive approach in the capital allowance process to enable businesses to make the most of timely and effective use of the available reliefs.