HMRC Consultation Paper – Capital Allowances
HMRC have issued consultation for proposed fundamental changes to capital allowances claims for fixed plant and machinery. This will impact all commercial property owners and property investors. Following consultation legislation is intended to be included in the Finance Bill 2012.
- Buyer and seller required to agree a capital allowances transfer value and notify HMRC of all sales within 1-2 years of sale of property. This is likely to replace the existing s198 tax elections which are not always used and only apply where the seller has made a claim.
- Prevent use of s198 tax elections for £1 and require transfers at tax written down value.
- Require all businesses to pool expenditure on fixtures within a short period after acquisition of a property (likely to be two years).
- Require businesses to pool fixtures for all historical expenditure.
- HMRC considers that taxpayers, aided by some capital allowances providers, have not satisfactorily checked the capital allowances history of the acquired fixtures.
- This is leading to the perception that allowances are being claimed more than once on the same fixtures due to this practical difficulty in tracing the tax history.
- HMRC have acknowledged they do not have adequate records or controls to track the tax history of former owners. They are seeking to correct this by requiring transfer values for all property sales.
What should you do now?
Commercial property owners should consider bringing forward any retrospective reviews of historic capital expenditure before the time limit is introduced in order to fully secure capital allowances benefits now.
There are some ambiguities in parts of the consultation paper and lobbying will continue to ensure clarity in the final legislation. We will keep you informed of any significant changes during the consultation period.
Contact us for a free assessment of your capital allowance position on your property to ensure you claim your full entitlement before change is introduced or you could potentially lose out forever.
To view the consultation document for ‘Capital allowances for fixtures’ please click the link below.
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