Both the buyer and seller of a commercial property must agree and sign an s.198 election, confirming the value at which the fixtures are to be transferred for the purposes of a Capital Allowances claim, either at the point of sale or within two years of the transaction date.
The seller must ‘pool’ the value of all fixtures within the property being sold and notify HMRC by including this in their tax return. Only once this has been declared to HMRC is the buyer able to claim Capital Allowances on the acquisition.
These changes are very important and should be addressed by engaging a specialist Capital Allowances adviser to ensure the correct procedures and documents are in place. Unless addressed correctly, the buyer of the property may lose any entitlement to claim Capital Allowances tax relief for ever.
Capital Allowances provide relief by allowing for the deduction of expenditure incurred in acquiring ‘Plant & Machinery’ from your taxable profits.
Most types of Plant & Machinery can be deducted in full as part of the Annual Investment Allowance (AIA) for the period in question, currently legislated at £1,000,000 pa; capital assets which don’t qualify for AIA (or whose costs breach the £1,000,000 limit) may instead be deducted at either 8% pa or 18% pa, depending upon the nature of the asset.
In addition to the AIA threshold, certain environmentally-friendly asset types may qualify for 100% Enhanced Capital Allowances (ECA), whilst assets acquired in pursuit of qualifying Research & Development may attract Research & Development Allowances (RDA), also at 100%.
Structures and Building Allowance (SBA) was introduced in the 2018 Autumn Budget to provide a straight-line relief on eligible construction costs incurred for new non-residential structures and buildings.
SBA’s provide tax relief on eligible construction, renovation or conversion costs incurred on or after 29th October 2018 at an annual rate of 2% on a straight-line basis over a 50-year period, once trade has commenced in the building. The rate has been increased to 3% from April 2020.
Capital Allowances can be claimed for qualifying expenditure on items which are used in the business, often referred to as ‘Plant & Machinery’.
Current Annual Investment
Allowance (AIA) limit
Total amount claimed
in the 2016-17 tax year
Ratio of companies not fully
claiming their CA entitlement
Upto 40% of the purchase price identified
as qualifying for property acquisitions
Upto 65% of the expenditure identified
as qualifying on fit-our/refurb spend
Tax Relief available on qualifying ECA & RDA Expenditure