Be prepared – property purchases and Capital Allowances!

Many business owners are still unaware that they may be entitled to claim a deduction against profits in the form of capital allowances for elements of the acquisition costs of business property. In general these will reflect the properly apportioned costs of plant and machinery, fixtures and fittings and more recently so–called “Integral Features” incorporated into a building which have been purchased as constituent parts of the premises in the overall property acquisition. Often these elements were overlooked by both the seller and purchaser in a property sale, but it was frequently possible to subsequently identify qualifying elements of the purchase and submit claims for capital allowances effective at a later date, potentially a significant number of years after the property was acquired by the business owner. However the luxury of that extra time is being withdrawn. With effect from April 2012, the rules for claiming capital allowances on fixtures changed for purchasers and there are further changes from April 2014. The new rules mean that clients can no longer ignore capital allowances when they buy a property and still benefit at a later date when someone draws their attention to the potential tax savings. Failure to act within a set time can now result in the purchaser losing all the capital allowances that would previously have been available. It is therefore now even more important to ensure that all essential capital allowances issues are comprehensively dealt with at the time the property is acquired. Ideally you need to act before exchange of contracts. The capital allowances issues must be considered at an early stage and if done before exchange of contracts then it can be built into the negotiation process and the specific identity and value to allocate to any qualifying fixtures and other elements can be agreed between the parties to allow the necessary capital allowance claims to be made. If the qualifying elements are identified but a value cannot be agreed, there is a fall back independent tribunal process. If this process is not undertaken within two years of the purchase, the opportunity to claim is lost. If  the capital allowances position was not dealt with before the property purchase, the position can still be rescued in that two-year time period, when the seller has claimed capital allowances. Potentially, there may also be previously unclaimed capital allowances available. How do you make sure you don’t lose out? Ideally, talk to us if you are a business owner considering a property purchase and certainly before any exchange of contracts. If the deal has already been done, then ensure that a capital allowances review is carried out well before the expiry of the two-year deadline. To contact us you can email p.smith@theMGroup.co.uk or d.green@theMGroup.co.uk, telephone 01865 552925 or fill in your query on our contact page.