Some welcome news ahead of the Budget.....

Currently there is no time limit for claiming capital allowances on fixtures in commercial buildings.  However, this rule recently came under threat when HMRC proposed to introduce the requirement that qualifying expenditure on fixtures would need to be pooled within 2 years of incurring the expenditure. The good news is that new proposals now suggest such a restriction will not be introduced, and that instead capital allowances can be claimed provided the claims are made before the assets are sold on, disposed of, or transferred to another person.

It is expected the legislation will instead focus on the purchase of second hand buildings by introducing measures to ensure the seller and purchaser agree on the value attributable within two years of the transfer of the property that contains the fixtures.

Although this is a further compliance requirement and another point for sellers and purchasers to agree on, we believe encouraging these discussions and documentation will be very useful.  We often prepare computations where a transfer out of, or into a company has happened and where it is difficult to ascertain what value was attributable to fixtures.  In such cases this can lead to additional work to try to place a value on these assets.  By encouraging documentation at the time of sale these problems can be removed and the tax computation process which follows becomes easier.

Action points:

•    If you recently bought a commercial building it is worth checking that you maximised all possible claims for capital allowances – this can provide a valuable tax saving at time when cost management is ever more important it is not too late to claim now even if the information that you have is sketchy.

•    Also, if you are considering buying or selling a building – it is worth seeking tax advice in advance of the sale to make sure that your tax allowances are maximized.

Currently there are no time limits for claiming capital allowances on fixtures included in commercial buildings such as central heating systems, lighting, wiring, air conditioning and lifts.

HMRC considered introducing a new two year time limit for these claims, but have recently announced that claims can continue to be made any time after acquisition provided they are made before the building is sold or transferred.

Further rules will be introduced to make the ability to claim capital allowances on a second hand building clearer.  This will make it ever more important for clearly drafted clauses relating to capital allowances to be included in the legal agreement when you buy or sell a building.

For further information or to discuss, please contact Lesley Sutton on 01484 550037 or taxchat@revellward.co.uk.