What makes a robust S198 election?

Jan 2013

Happy New Year and welcome to 2013. With Christmas a fast fading memory and the January rush in front of us it is time to get down to business. Will 2013 be the year we finally move out of this age of austerity? Let’s hope so.

At the end of last year we looked at the importance of making valid elections (S198) for the transference of capital allowance eligible items in a property transaction, but what makes a valid and robust S198?

In short a good S198 is detailed and exact.

[S.201 CA2001] states the elements that must be present.

1.) Parties’ details: Names, tax ref

2.) Particulars of interest being acquired (including date of transaction)

3.) Info to identify the property: address and title no.

4.) Amounts to be transferred

5.) Info sufficient to identify the P&M

Generally the first four points do not cause too many issues however there is an interesting variety of ideas on what satisfies point 5. HMRC’s guidance states the following “the rules work on an asset by asset basis, inspectors may accept a degree of amalgamation where it will not distort the tax computations” [HMRC CA manual para 26850].

Later in January we will look further at what common mistakes can cause distortion of the tax computations.

In brief, a S198 should list as much detail as possible, only contain items claimed on and only amalgamate at an elementary level. You will not get penalised for having more detail. Submitting a detailed election should cause no problem or great amount of extra work where a thorough analysis was conducted to substantiate the original claim. This is of course something that we can assist with.

If you would like to discuss this further please don’t hesitate to get in contact or visit us at www.STaxUK.com