Capital Allowances on Property Transactions: What you need to know Article Image

Capital Allowances on Property Transactions: What you need to know

The rules on Property Capital Allowances were radically changed in recent years. John Fox, Manager of our Wellington office shares his expertise on the changes and what you need to be aware of.

Whilst buildings themselves do not qualify for Capital Allowances, they will contain items of plant and machinery, such as fixtures and integral features, which do qualify.  It has been suggested that up to 35% of the cost of a new commercial building and up to 50% in the case of a refurbishment could qualify.

Due to the difficulty of accurately valuing systems embedded in a property, many businesses may only be claiming a small portion of what they are entitled to.  This work requires a fusion of tax and surveying expertise that is rarely found in general accounting firms.

Allowances are transferable at the point of sale of an existing building generally by a jointly signed election detailing the fixtures and fixing their corresponding transfer values.  These elections are often overlooked and are poorly understood by the conveyancing community.  From April 2014 the vendor is required to pool the relevant expenditure by making either a claim for capital allowances or to notify HMRC of their qualifying expenditure and add it to their pool without making a claim.  The vendor must make a written statement of the disposal value of the capital allowances eligible assets and provide the purchaser with a copy.  In the absence of such an election, the qualifying expenditure for the purchaser will be set to nil, which will be binding on all future owners.

If the vendor and purchaser can not agree the transfer values, reference may be had to a tax tribunal for an independent determination.

Buying, Selling, Building or Refurbishing? Take Advice on Capital Allowances

It is essential that anyone buying, selling, building or refurbishing a property take advice on the available capital allowances from someone with a sound understanding of the complex rules and with good tax and surveying experience.  Advice should be taken as early as possible in view of the complexity and extent of work involved.  Failure to act could reduce the market value of a property.


If you have concerns about any of the points raised in this article then contact Aspen Waite today and we will be able to advise on your individual circumstances.


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