HMRC Introduces New Rules

Historically, fixtures within commercial premises have been routinely ignored or omitted when initially calculating capital allowances. However, this has not precluded claims for the associated relief at a later date. Going forward, however, the option to retrospectively claim will no longer exist. Failing to account for the fixtures at the pre-contract stage of the process will thus have significant consequences for sellers and buyers alike.


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End of Transitional Period

At the end of March 2014, the transitional rules relating to the new legislation will end. From April 2014, a change to the way in which capital allowances on commercial buildings are treated comes into force. The new rules require the seller to factor in any fixtures in calculations prior to the sale. Failure to do so will preclude the buyer from subsequently claiming allowances on any fixtures which are included as part of the transaction.

What Are the Potential Issues?

Commercial property typically comes with a range of fixtures, such as electrical and building management systems, air conditioning, alarms, cabling for information technology systems, radiators and a myriad of other fixtures which are necessary or specific to the purpose of the building or business therein. Depending on the building in question, these fixtures may account for between 10 per cent and 30 per cent of the value of the property, representing a sizeable figure. From the end of the transitional period, these changes could potentially see unwitting purchasers lose the ability to claim capital allowances on fixtures which already exist in the building, should the seller fail to include them in the initial transaction value at the pre-contract stage of the sale.

Arbitration in the Event of a Dispute Between the Parties

In the event of any dispute during the process, the case can be referred to a tribunal, giving the parties the opportunity to determine a value which seems reasonable and fair. In order to pre-empt any such issues, it is important to ensure that the full valuation is properly assimilated as an integral part of the pre-contract process. This must now include an accurate capital allowances review.

Should the seller have failed to have identified and claimed the appropriate allowances, there will be no opportunity to settle the dispute via a tribunal after the event. So failure to address this essential element of the process from the outset may result in substantial financial losses.

Limitations to Scope

One final consideration to factor into any decisions is that the changes apply only to fixtures purchased by the previous owner since April 2012. However, prior to purchasing any commercial property, it is advisable to make thorough enquiries and to procure independent valuations of all associated fixtures and fittings. This should ensure that the parties are in a position to take full advantage of capital allowances, even in the light of this latest change to the legislation. Further information can be obtained from