Changes to the Rules

New rules came into effect in April 2012 and there is a transitional period for implementation of certain elements of the new rules up to April 2014.  The rules were contained in the 2012 Finance Act, the main points of which can be summarised as follows:

  • Since April 2012, where a seller of a commercial property has claimed capital allowances an election is necessary to fix the disposal value of the fixtures, and hence the claim value for the buyer.  The election is a matter of negotiation between the parties, but the process must be completed within 24 months.
  • From April 2014, it will also be mandatory for the seller of commercial property to pool the value fixed with the purchaser, if they have not already done so, in order for the purchaser and subsequent owners to be entitled to claim allowances. The seller and purchaser must either jointly elect a figure and apportion the same up to the original cost of the fixtures, or use the first tier tribunal proceedings to agree the value.  The time limit is 24 months from the end of the accounting period of sale.

Where properties were acquired prior to April 2012, allowances can continue to be claimed under the existing rules at any time until sale. This means there is no time limit for claims on ‘historic expenditure.’  Until April 2014, there is still considerable freedom as to when capital allowances can be claimed.

Allowances on plant and machinery will be available to the extent they have not already been relieved under the ‘Business Premises Renovation Allowance’ (BPRA) scheme.

  • There are special rules to cover the situation where a non-taxpayer, such as a charity or pension fund, has in the past taken over fixtures from a tax paying business.  This affects tax paying purchasers who then purchase that property from the non-tax paying organisation.  In cases such as this, there are statutory requirements for certain information to be made available to the purchaser.  Specialist advice will be required in these situations.

From April 2014, the consequences of not pooling the capital allowances in time are that no capital allowances will ever be available to a purchaser or any future owners of the property. Therefore it is possible that two similar properties could have different values, if a purchaser is able to obtain capital allowance relief on one property but not on 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 appoint specialist capital allowance advisors and accountants as soon as a disposal or purchase is contemplated. This will ensure that the correct information is made available to their professional advisers and that 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 timely and effective use of the available reliefs.