For property sales after April 2014, any unused capital allowances fixtures will not automatically be available to the purchaser. Property owners now need to make sure any historical capital allowance claims are addressed during the sale, if not before – otherwise they could be lost for good.
Owners of properties can claim capital allowances many years after making their purchase, with these historical claims potentially generating large tax refunds. Before April 2014, when a property was sold, capital allowances could transfer to the purchaser of the property via a CAA2001 s.198 election or by apportioning the buyer’s purchase price, restricting the capital allowances to the original claim value. However, if no capital allowances were claimed, the purchaser could still make a claim based on an apportionment of their own purchase price.
But the rules have recently changed. For any property sale from April 2014 onwards, the ability to claim capital allowances will not be as straightforward as it has been in the past. “Unless the capital allowances are discussed during the transaction stage, they could well be lost,” says Sunil Sharma, head of capital allowances.
Property owners may not always feel the need to claim all the capital allowances they are due. This could be, for example, because the business is loss-making. “Nevertheless, such property owners – even if they have no imminent plans to sell their property – could still benefit from making a capital allowances claim,” Sunil says. “This is because the question of capital allowances will more than likely come up in property transactions from April 2014 onwards. Purchasers will want claims to have been made, so that any unclaimed capital allowances can be transferred during the sale.”
Taking action well in advance of any sale is advisable because it could take at least 12 months for HMRC to agree a capital allowances claim. “If HMRC has not agreed the figure at the time of the property sale, this creates uncertainty for the purchaser,” Sunil warns. “The purchaser may expect the vendor to carry that risk. It is therefore in everyone’s interest that the amount of the capital allowances claim is guaranteed – and that takes time.”
As Sunil notes, even if those who purchase property post April 2014 are unable to make use of the allowances themselves, they may still want to safeguard any unused capital allowances so that they can be passed on to a future purchaser. “It is important that property owners take action on their capital allowances sooner rather than later,” Sunil advises. “For property transactions taking place after April 2014, safeguarding unused capital allowances will be essential.”
If you require support or would like to discuss the changes further, please contact Sunil Sharma.