Capital Allowance Claims on
The purchase of any commercial property will raise important and potentially complex issues regarding capital allowances, in terms of both establishing the basis of entitlement and the value of the allowances available. The allowances can be worth many thousands of pounds to a purchaser and therefore must be given proper consideration at the time of an acquisition.
Broadly, a business can claim a capital allowance deduction from taxable profits based on expenditure on fixtures and fittings contained within a building. For example, a boiler installation, lighting or electrical wiring can qualify.
Since April 2014, the purchaser of a commercial property can only claim capital allowances on fixtures and fittings if the items were identified and ‘pooled’ by the seller prior to disposal, otherwise the allowances are permanently lost to future owners. This means that any possible claim should be reviewed before buying or selling a property.
In addition the capital allowance value must be agreed by both the seller and the purchaser within two years of the transaction, or the matter is referred to a tribunal to decide. The value will have tax implications on both sides of the transaction therefore it important that both sides take advice on the consequences of the valuation and it is dealt with as part of the sale process.
What if no claim has been made previously?
It may be possible for capital allowance claims to be made for buildings which have been owned or added to by the vendor some time ago. There is no time limit attached to the ‘pooling’ requirement, but the seller must allocate expenditure to a chargeable period ending on or before the date of disposal in order for the buyer to benefit from future capital allowance claims.
If you have incurred significant expenditure on extending, purchasing or renovating a commercial property and you wish to be sure that all available allowances have been claimed, or you are considering buying or selling a property then please contact our Tax Director, Jenny Marks for more information.
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