HMRC propose changes to how “fixtures” are dealt with for Capital Allowances
On 6 December 2011 HMRC published draft legislation which included clauses to change the way “fixtures” are dealt with for capital allowances. This followed a Consultation process over the Summer.
The good news is that no changes have been made to “retrospective claims” – what this means practically is that it is still possible to make claims for Capital Allowances in respect of historical expenditure no matter when it was incurred. So, if a building was acquired in, say, 2002 it is still possible to make a capital allowances claim now in respect qualifying fixtures within the building so long as the building is still owned.
There will, however, be changes to how capital allowances are dealt with on acquisitions after 6 April 2012 (1 April for companies) as “mandatory pooling” is being introduced – ie the expenditure qualifying for capital allowances has to be identified before an onward sale of the property. If a purchaser of a property wants to claim capital allowances on fixtures then the vendor has to have “pooled” the qualifying expenditure irrespective of whether they want or need the capital allowances. If the vendor does not pool such expenditure then the purchaser cannot claim capital allowances on those fixtures.
Furthermore, when a building is sold, the vendor and purchaser need to sign a “Record of Agreement” within two years of the transaction to fix the value of fixtures – this value does not have to be the tax written down value but it is left to the discretion of the two parties to agree.
EDF Tax says:
The fact that HMRC have not sought to restrict retrospective claims is welcome - should you or your clients have properties where capital allowances have not previously been claimed on fixtures please contact us as we can help you claim the allowances you are entitled to.
HMRCs main concern with capital allowances on fixtures was the lack of symmetry in many cases – ie the vendor did not necessarily bring in the same deposal proceeds as the purchaser bought in as expenditure. The “mandatory pooling” requirement was flagged during the Consultation and it is no surprise that it has been introduced. It will place a burden on vendors in particular to pool qualifying expenditure even where they do not need the allowances. However, having pooled the expenditure it should make the building more saleable as the purchaser will know they can claim capital allowances on the fixtures.
12 December 2011
Who to contact?
For further information contact Craig Hughes on 07717 840596 or email at chughes@edftax.co.uk.