The rules on capital allowances for fixtures are designed to ensure that expenditure is relieved only once, even if the fixture concerned has a number of different owners over the course of time.
This is achieved by placing a limit on the expenditure for which allowances are available to a taxpayer who purchases a building from another taxpayer who is eligible for capital allowances. Qualifying expenditure on fixtures is restricted to the amount that is brought into account by the vendor as the disposal value of the fixtures in its capital allowances computations (which will, in turn, be limited to the amount of the vendor’s acquisition costs that qualified for capital allowances).
Where fixtures are sold as part of a property, clearly, there is an advantage to the purchaser in allocating as much of the sale price as possible to the fixtures in order to maximise allowances. By contrast, the vendor will normally wish to allocate as little as possible to the fixtures in order to maintain the size of the capital allowances pool on which it may continue to claim allowances, and to avoid any balancing charge. Accordingly, there are rules to govern this allocation, and to ensure that the same amount is allocated to fixtures by both the vendor and the purchaser.
For further details see our factsheet here
Business tax team