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Purchase of Buildings

Where a property is purchased and no previous capital allowances claims have been made, capital allowances are determined by separating the cost of the Plant and Machinery from the land and the buildings and then apportioning the Plant and Machinery cost from the purchase price using valuation techniques approved by HM Revenue and Customs.

When applied to purchased buildings, which includes the cost of land (on which allowances are not available) the qualifying Plant and Machinery could account for as much as 30% of the purchase price of an air conditioned office building, 20% of a basic office building and up to 10% of an industrial building.

Where a property has been purchased and the seller or a previous owner has claimed capital allowances, the buyer’s entitlement to claim may be restricted.

It is common for a seller who has claimed capital allowances to safeguard his tax position by bringing a disposal value, for the qualifying Plant and Machinery on which he has claimed capital allowances, into account by way of an Election under Section 198 of the Capital Allowances Act 2001. This disposal value must not exceed the original cost and providing it conforms to the prescribed format and timeframe, will be binding on all parties, and will prevent the seller from suffering a clawback (balancing charge).

It is not uncommon for this disposal value to be in the sum of £1.

When purchasing a building, the buyer will generally be expected to jointly enter into the Section 198 Election with the seller. Section 201 CAA 2001 requires the seller to provide sufficient information for all parties to identify those assets claimed and included within the Election. We would recommend that the seller is requested to provide a schedule listing those assets claimed.

Where the seller’s disposal value is anything other than £1, a schedule of claimed assets and their respective disposal values should be provided. With effect from April 2008, the onus is on the buyer to ensure that assets are allocated into their correct pools, and therefore it is not acceptable to agree to an Election which simply relates to ‘all Plant and Machinery’.

The provision of a detailed schedule of claimed assets, will enable the buyer to establish how comprehensive the seller’s claim was, and could therefore enable a buyer to claim capital allowances on assets not previously included within a seller’s claim.

Where a comprehensive capital allowances claim has been made by the seller or previous owner relating to expenditure incurred prior to April 2008, the buyer may be entitled to claim for certain additional assets that previously did not qualify for capital allowances, most commonly including lighting, general power and cold water installations.

As part of the buying and claim process, PJB will carry out all appropriate research to ascertain the entitlement to claim and to advise on the potential levels of allowances that may be available.

 
 
 

The information contained in our website is believed to be correct, but there may be errors or omissions for which PJB cannot be responsible. It is therefore essential to take advice on specific issues.

 

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Purchase Price

This is the original or anticipated purchase price or development cost of your property.

Do not enter the current value here.

Building Type

Please provide the type of building you are looking to claim allowances on.

Note: You will be able to add further information about the type of building in the next step.

Your options here are;

  • Office.
  • Retail: Including high street, shopping centres and retail warehouses.
  • Mixed Use.
  • Industrial: Including warehouses and distribution centres.
  • Other: Leisure, hotels, casinos etc.
Building Category

Please select the description that best suits your property.

Other Information

Please provide any additional information about your property that you may consider appropriate.

Floor Area

Please enter the total floor area of the property.
You can provide either square footage or metres, but only use figures here.
The floor area you specify can either be gross or net internal space.

Floor Area Units

Please select the type of area e.g. Metres or Feet
and if the measurement has been taken as net or gross internal space.

Date of Purchase

Please enter the approximate month and year of purchase, or
if you have developed the property, please provide the
approximate date of completion.

Location Of Property

Where is the property located? Please provide town/city, and country.