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Don’t get caught out by changes to Capital Allowances

Posted on 22nd April 2016 by

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The introduction of the new mandatory pooling rules from April this year means that if a purchaser of a second hand commercial property buys from a seller who was entitled to claim Capital Allowances but did not for some reason, then the purchaser will not be entitled to any Capital Allowances on the purchase and neither will any subsequent purchaser of that property.

This may well affect property values going forwards and presents a real potential issue for unwary purchasers if they are not properly advised. 

Measures can be put in place at the time of purchase to protect the purchaser’s position, but these need to be written into the contract. It is now extremely difficult to resurrect the position post purchase.  If you are contemplating buying a commercial property then you need to speak to one of our Capital Allowance consulting team as soon as you engage solicitors so that we can establish the Capital Allowance position and advise you as appropriate. Delays in dealing with the Capital Allowance related issues will most likely delay the transaction. Specialist advice really is required here as most lawyers will not advise on Capital Allowances.

Capital Allowance specialists will be far more involved in commercial property transactions going forwards. Due to the new rules, any purchaser wishing to secure tax relief on the purchase of the property needs to deal with this at the time of purchase. The entitlement on any purchase is largely dependent upon the Capital Allowance history of the building and what has been claimed by previous owners. It is therefore critical that this history is properly established at the point of purchase, not least to ensure that the seller has made full claims for allowances, and if they have not, to rectify the position as part of the acquisition process.

Capital Allowance histories will now become a very important part of commercial property transactions and sellers of commercial property will be asked to provide a lot more detail on histories than they have done in the past. This will likely mean incurring additional costs as part of the sale process due to your Capital Allowance adviser having to deal with more comprehensive queries from the purchaser.

If you have a commercial property that has not been reviewed for Capital Allowance eligibility then now may be a good time to undertake that review to ensure that your Capital Allowance claim position is full and up to date. This will be especially relevant where a potential sale is contemplated in the not too distant future. This will avoid unnecessary complications at the time of sale and will greatly increase your chances of retaining the benefit of the allowances yourself, as opposed to being asked to make the claim by the buyer as part of the sale process so the allowances can be transferred to the them for their benefit under the sale contract.

Streets have a specialist Capital Allowance Team that would be more than happy to assist you with reviewing your historic Capital Allowance entitlement on past acquisitions, refurbishments or new builds as well as offering you specialist advice to maximise your position when buying or selling commercial property.

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