Capital allowances election for fixtures in buildings

When a commercial building is sold the seller and the purchaser can agree to apportion part of the price to fixtures which qualify for capital allowances, i.e. plant, machinery and integral features, included with the property. Where an apportionment is made, subject to conditions and restrictions, they can jointly elect for the value to be effective for capital allowances purposes. 

Choosing to make an election

For the purchaser of a previously owned building to be entitled to claim capital allowances (CAs) on plant etc. fixed to the building, they must agree a value with the seller. Where a value is to be attributed to plant and machinery there are two methods of determining what it is, either:

• a joint election under s.198 Capital Allowances Act 2001 (or s.199 for leased property) to settle the amount of the sale price attributable to fixtures (which cannot exceed the seller’s original cost); or
• where agreement on value can’t be reached, an application to the First-tier Tribunal to determine it.

Value for CAs

There is no requirement for the purchaser and the seller to agree a value or, if they do, to use the seller’s tax-written down value. However, since 2014 the maximum value that can be attributed to plant etc. is its cost to the seller. Further, the purchaser can only claim CAs for plant etc. which the seller has recorded in their capital allowances pool of expenditure. Thus, if the seller has not identified plant etc. as qualifying for CAs, the purchaser cannot apportion part of the amount they paid for the property to it.

An election under s.198 or s.199 must contain certain information to be valid (s.201 Capital Allowances Act 2001). The form of the election is therefore important.

Time limit

The election must be made in writing within two years of the date of completion and is irrevocable.