Capital Allowances and Buildings

The Finance Bill 2012 introduces a new provision that makes the availability of capital allowances conditional upon:

1. previous business expenditure on qualifying fixtures being pooled before a subsequent transfer to another person;
2. the value of fixtures being fixed formally within two years of a transfer.

This requirement can be met by the seller and the buyer having agreed the sales value of those fixtures, or by making a joint election under section 198 of the Capital Allowances Act 2001

If the owner of a property has returned a specific disposal value for the fixtures and it is now too late to fix an apportionment , a written statement made by the purchaser form the past owner of the actual amount of the disposal value that he has brought into account should suffice.

There is an alternative method of fixing the value that applies only in cases where an intermediate owner or lessee, who was not entitled to claim an allowance, had failed to determine a fixtures apportionment with the past owner. It does this by introducing sections 187A and 187B into the Capital Allowances Act 2001.

The new provisions apply if:

• a current owner incurs capital expenditure on acquiring a property containing fixtures from another person, for the purposes of his business;
• the previous owner is treated as having been the owner of the fixtures as a result of incurring other expenditure for the purposes of his business;
• where the main, or one of the main purposes of entering into the transaction is to enable any person to obtain a tax advantage that would not otherwise have been obtained;
• a sale and leaseback.

Where a transaction, scheme or arrangement has an avoidance purpose, the buyer’s allowances are restricted to cancel the tax advantage.