Capital Allowances: Buying and Selling Commercial Property

Posted on 3rd July 2017 by Streets -  What's trending?

Image to represent Capital Allowances: Buying and Selling Commercial Property

To get the most out of your property purchase by way of capital allowances it is important to start thinking about capital allowances from the beginning of the conveyancing process so that a fixed value can be agreed upon sale. Before agreeing the contract, you must be satisfied that the seller has identified all eligible expenditure embedded in the property and has made a claim for capital allowances in respect of this already.

Fixed Value Requirement

It is now a statutory requirement that, if the purchaser is to secure tax relief in respect of any eligible items within the building that have been the subject of a capital allowances claim by the seller, the seller and purchaser must agree the value attributable to fixtures in the sale documentation and fix that value by way of a formal election within two years of the date of sale. The election will provide certainty for both parties of the capital allowance consequences of the transaction. Should this not be agreed, the buyer would not be able to claim the capital allowances without making a formal application for the apportionment to be determined by the First Tier Tax Tribunal (a costly exercise). This requirement also means that the true capital allowance history of the property being disposed of needs to be established to enable the agreement to be reached and election documentation to be prepared. This exercise has historically often been overlooked in the sale process or given little significance.

Mandatory Pooling Requirement

A further measure was introduced from 1 April 2014, known as the “mandatory pooling requirement”. This represents a severe risk for unwary purchasers.  Under these rules a purchaser of a second hand property will only be entitled to claim allowances on second hand fixtures within the building if the fixtures have been properly identified by the previous owner and recognised in their capital allowance computation. This only applies where the previous owner was entitled to make a claim and therefore would not apply to purchases from pension schemes and tax exempt charities. The significance of this is that if the previous owner has failed to make a claim for capital allowances, which is not an uncommon occurrence, the entitlement to those allowances will be lost for all future purchasers of the building.

By seeking the advice of a capital allowances specialist early in the negotiation process you can ensure that you take full advantage of the capital allowances available to you on the purchase of your commercial property.

If you are thinking of purchasing or selling a commercial property please email fo further help and advice.

No Advice

The content produced and presented by Streets is for general guidance and informational purposes only. It should not be construed as legal, tax, investment, financial or other advice. Furthermore, it should not be considered a recommendation or an offer to sell, or a solicitation of any offer to buy any securities or other form of financial asset. The information provided by Streets is of a general nature and is not specific for any individual or entity. Appropriate and tailored advice or independent research should be obtained before making any such decisions. Streets does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of obtaining Streets' visual or audible content.


The content used by Streets has been obtained from or is based on sources that we believe to be accurate and reliable. Although reasonable care has been taken in gathering the necessary information, we cannot guarantee the accuracy or completeness of any information we publish and we accept no liability for any errors or omissions in material. You should always seek specific advice prior to making any investment, legal or tax decisions.

Expert insight and news straight
to your inbox

Related Articles

Budget 2024: Changes to the Non-Dom Regime and their Implications

In the wake of the Budget 2024 announcements, significant changes to the UK's non-domiciled individual (non-dom) regime are on the horizon, with scheduled implementation for 6 April 2025. However, uncertainties loom, especially considering the potential shift in political power after the next General Election. While the outlined reforms ...

How do you avoid financial forecasting that ends up with rain instead of sunshine?

Financial forecasting can often feel like the weather forecast, financial predictions not always being as rosy as planned, or in many cases, as hoped - a bit like the weather whilst sunshine is predicted rain all too often can be the outcome.  Whilst many businesses will look to ...

Working Capital Cycle

The longer the working capital cycle, the more time it takes for your business to get a robust cash flow. It’s good practice for businesses to manage their cycle by looking at each step where possible. This could be by selling stock or product quicker, collecting monies owed ...

You might also be interested in...