April 2012 new legislation came into effect with the stated aim of stopping double claiming of capital allowances where a property has changed hands. The more cynical would point out that this will inevitable cause many perfectly eligible fixtures to simple not qualify in anyone’s hands. This will result in a substantial gain for the Treasury at the expense of businesses.
So if you or your clients own their own commercial real estate it is certainly something to take notice of.
But what has changed?
In essence it has shift from defaulting on to defaulting off! By this we mean that in the past if a valid election (S198/199) was not made to transfer the pool, which to do the asset would have to be pooled in the first place, the door would potential stay open for a claim by the new owner. Now unless this matter is handled in line with the new legislation purchasers will be deemed to have a transfer value of NIL.
What needs to be complied with? Both:
1.) “The pooling requirement [effective from April 2014] all previous business expenditure must be pooled before a subsequent transfer, and
2.) “The fixed value requirement” [effective from April 2012] the value of fixtures must be established within two years of the sale of the property; either by a valid S198/S199 or recourse to the tribunal (there is an alternative to be used in some rare cases).
If these are not observed then purchasers will lose out on all available capital allowance. This binds all future owners and will have almost certainly devalued their new building overnight.
There are of course many more nuances to the new legislation that a blog can’t cover. If your clients own commercial property or are looking to sell/buy then please don’t hesitate to contact us to discuss these changes in further depth.