Buying or selling a commercial property? Are you maximising your Capital Allowances?

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Fixtures in a commercial property are often mistakenly thought to be only in factories or large office blocks, for example air conditioning units, specialised lighting or lift shafts: but there are fixtures in other types of commercial property, for example furnished holiday lettings, hotels and nursing homes. Fixtures are described as the items which are permanently attached to the property and to remove them would cause damage to the fabric of the property.

Capital Allowances give relief against tax for the depreciation in value of a fixture over its life time. New rules were introduced from April 2012 for the buyer of a commercial property when making a claim for Capital Allowances on fixtures. The first part of the changes to the rules came into play on 1 April 2012 and was called the Fixed Value Requirement. The rules will be fully implemented from 1 April 2014 with the addition of the mandatory pooling requirement.

On sale of a commercial property the fixtures have to be given a disposal value but since its introduction in April 2012, the Fixed Value Requirement requires the buyer of the commercial property to take formal steps to establish the value of the fixtures within two years of acquiring the property. If the seller and the buyer can’t agree on the value then either party can refer to the first tier tribunal (which is part of the UK court system) for a binding valuation.

From April 2014 the seller must add together or “pool” the value of the expenditure on fixtures – even if he has not claimed the Capital Allowances available to him as a deduction. The buyer is prevented from claiming Capital Allowances for fixtures unless the seller has first identified and pooled the expenditure.

As a seller of a commercial property it is prudent to ensure you have claimed all of the allowances due to you before identifying the fixture values to establish the pool which will be required by the solicitor in support of the other sale details.

As a purchaser of a commercial building it would be prudent to insist on the fixtures information being available for inspection prior to a purchase being agreed to protect the future capital allowances claims but also to ensure there are no issues on a future sale of the property.

Prior to any future sale you may have to pay to have a survey of fixtures carried out and because by then the sale will be imminent you will receive no financial benefit from this survey. Therefore we strongly recommend that all owners of commercial buildings carry out a survey now to ensure a full record of the fixtures of your commercial property are
recorded and to detail any new fixtures.

A Capital Allowance claim for any previously unidentified fixtures will result in a reduction in the tax payable and may even attract a refund of tax paid. Why not speak to us to arrange a visit by one of our team of fixtures specialists and secure the tax allowance you may otherwise miss out on?

Any questions?

If you would like to arrange a free meeting with a Liverpool accountant to discuss capital allowances or any other business tax, either at our office or at your premises, please contact us on 0151 724 3960 or by email at [email protected].

Alternatively, you can use our website contact form.

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Added by Jon Davies

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