Don’t let your Capital Allowances go up in smoke!
To all commercial property buyers and sellers: remember, remember post April 2014, you must pool, transfer and claim!
Due to the April 2014 changes, it is now mandatory for any eligible capital expenditure to be pooled and transferred as part of the legal transaction. Without these provisions in place, the ability to claim capital allowances on the commercial property is lost forever and the embedded capital allowances value is destroyed.
The seller’s position must be established through pre-contract enquiries. If the seller has not claimed capital allowances during their ownership, they must undertake a full claim within a stipulated time frame and pass the full value to the buyer, via a s198 election. This will necessitate a correctly drafted warranty within the sale and purchase contract to allow the position to be dealt with post completion. This prevents any delay to the legal transaction as parties are often working to tight deadlines.
To understand the seller’s treatment of capital allowances, the following documents must to be reviewed:
- the sale & purchase contract
- the CPSE replies to enquiries
- the s198 election
A review of the above documentation will determine next steps.
Disregarding the available capital allowances in a property at the time of acquisition or sale will typically negate the ability to claim at all, and the allowances will be lost forever. Furthermore, should a nominal election of £1 be inserted to the s198 election without proper investigation, the ability to claim valuable allowances in the property will be removed.
How can YesTax help?
Get us involved before legal exchange of contracts!
YesTax will liaise with all professional advisers at the time of the legal transaction. We ensure your capital allowance claim is protected and will not slow down the sale or purchase transaction. There is no fee until we are able to make a capital allowances claim for you. We will undertake all of the necessary due diligence, regardless of whether you make a capital allowances claim or not.
- Liaise with your professional advisers
- Ensure the SPA is structured correctly
- Review and approve CPSE replies to enquiries
- Draft the s198 election to ensure all available allowances are pooled and transferred
- Undertake a full site survey and valuation exercise
- Make assessments and obtain detailed cost breakdowns on embedded features such as heating, lighting, cold water systems, pipework, electrics, security systems, climate control units and much more to ensure the tax relief is maximised.
- Ensure expenditure is pooled correctly
- Produce detailed reports in line with best practice as approved by HMRC
So, please don’t let your tax relief opportunity go up in smoke! Whenever you are in the process of buying or selling, get in touch.