Capital allowances can be crucial on the purchase of a building which comes with second-hand fixtures assuming various conditions which allow for the claim to be made are met. Typically, this includes hidden expenditure on elements such as air conditioning, wiring, heating, lighting and security systems – essentially everything that would remain in the building if you tipped it upside down! Failing to meet the conditions prior to a transaction could turn out to be costly (up to 100% of the value of the assets) as it could prevent any relief for the purchases post-acquisition.
The availability of capital allowances to a purchaser are conditional on the pooling of relevant expenditure prior to a transfer, the seller and purchaser formally agreeing on a value for fixtures within two years of a transfer and an election under CAA01/S198 or S199 being made in writing.
The ‘fixed value requirement’ is met by the past owner and current owner formally agreeing on a value for the fixture within two years of the transfer, or by commencing formal proceedings within that time to agree on the value, or in certain circumstances by written statements being supplied.
The ‘disposal value statement requirement’ applies in exceptional circumstances and is met by the past owner providing a written statement, within two years of his cessation of ownership, of the amount of the disposal value of fixtures which he had some time earlier been required to bring into account (for example, when he permanently ceased his business).
An election under CAA01/S198 or S199 must be made by notice in writing to HMRC.
It should contain the following information:
- the amount fixed by the election
- the name of each person making the election
- information sufficient to identify the plant or machinery fixture and the relevant land,
- particulars of the interest acquired by or the lease granted to the purchaser
- the Unique Tax Reference number (UTR) of each of the persons making the election, or confirmation that the person does not have a UTR.
The election is irrevocable.