Capital Allowances – The Old Rules

From our perspective, one of the major benefits we have been able to bring to clients, is that we have undertaken retrospective capital allowances claims on their commercial property. In theory this is possible whether the property was purchased yesterday or 15 plus years ago. For commercial property purchased before April 2014 this may well still be the case. So whether a person owns an Industrial Unit or a chain of Luxury Hotels (and everything in between) as long as they are paying tax or about to pay tax the possibility of making a capital allowances claim needs to be investigated (with us of course).

Fixed Value Requirement – April 2012 Onwards

However from April 2012 onwards the Finance Bill 2012 introduced the “Fixed Value Requirement”. This meant that where the vendor had made a claim for any “Fixtures” within the property that the value of these fixtures had to be agreed between the parties by means of a Section 198 (or Section 199 for Leases) Tax Election Agreement. For more information on Section 198/199 Tax Election Agreements see our previous post here.

Pooling Requirement – April 2014 Onwards

However from April 1st 2014 for those chargeable to Corporation Tax and April 6th 2014 for Income Taxpayers the law has changed. Property bought on or after these dates may, in many circumstances, not be eligible for a retrospective capital allowances claim if the sale transaction is not dealt with correctly.

If the buyer is to potentially benefit from previously claimed and unclaimed capital allowances the allowances situation will need to be fully reviewed before completion of the purchase. Also this review will be undertaken on the basis of the vendor’s expenditure not the seller’s offered price as has historically been the case at least where capital allowances have not been previously claimed.

However the story doesn’t end there because if a capital allowances claim is to be undertaken at this stage the capital allowances will have to be pooled into the vendors accounts in an open accounting period which commenced before the date of completion on the property. This is referred to as the “Pooling Requirement”. Therefore the ideal situation is that before completion “The Fixed Value Requirement” will have been established and the Section 198 / 199 Election Agreement signed by both parties and the vendor will have agreed to meet the “Pooling Requirement”.  The results for not doing any of the above could well mean the buyer will not be able to claim capital allowances on the fixtures they have purchased within the property and neither will any subsequent buyer potentially damaging the property’s re-sale value.

Guidance for Solicitors

Due to the complexity of the new rules and the need to deal with capital allowances more comprehensively as part of the conveyancing process the Law Society has issued new guidance for Solicitors. The information can be accessed by clicking on this link.

Requirements are not Mandatory

However this does not mean, as some commentators have claimed, a capital allowances claim is mandatory as part of any property transaction, both sides can choose to ignore the situation that is if they are even aware the new legislation exists! Or the buyer may negotiate a lower purchase price on the basis they will not able to make a future capital allowances claim on the fixtures purchased and therefore the property may be de-valued in the future.


This post has been put together to illustrate some of the key points of the new legislation but should not be relied upon to give definitive advice to clients. Each property transaction will be different and the Capital Allowances legislation is complex. If you are looking for advice on a particular property transaction then please contact us directly so that we can advise you based on the facts of the case. Our advice is normally freely given and a charge is only made to a client when we are able to make a capital allowances claim on their behalf.