Tuesday, June 14th, 2011
HMRC have issued a Consultation Document proposing significant changes to the way Capital Allowances claims for Plant and Machinery fixtures are handled.
HMRC’s Reasons for Change…
- HMRC believe that some vendors / buyers neglect to agree a sale price for fixtures, and therefore may insert different values for the same fixtures in their respective Capital Allowances Claim;
- As expenditure on fixtures can currently be pooled some years after the fixtures were acquired, HMRC may not have the means to check what the original values were – e.g. original vendor may no longer be trading etc.
- Issues surrounding late claims lead to a lack of clarity on what has been claimed, and enable some Capital Allowances to be claimed more than once on the same fixtures;
- HMRC’s proposed new requirement for agreement on fixtures sale price, and formal notification from the buyer and seller is designed to overcome the current lack of information.
- The imposition of a 1-2 year deadline for CA claims is designed to ensure that the information is still available within the open accounting periods of the vendor and buyer.
Key HMRC Proposals:
The proposed changes, detailed in brief below will have significant consequences for all businesses and commercial property owners and investors.
- Vendor and Buyer will agree the apportionment of purchase price attributed to fixtures and formally notify HMRC of this apportionment;
- Mandatory Pooling of Fixtures – businesses will be required to pool their expenditure on fixtures within a short period of time after acquisition in order to qualify for Capital Allowances;
- The time limit proposed for pooling is 1-2 years after acquisition;
- The use of CAA 2001 s198 tax elections will be prevented;
- HMRC are also proposing the enforcement of a requirement that businesses pool all historical expenditure within 1-2 years of the new Mandatory Fixtures rules commencing;
- The above changes are currently in consultation (until 31st August) and HMRC intend to include the legislation in the 2012 Finance Bill.
What Next?
Contact CapAll Solutions for specific advice relating to the proposed new regulations.
Currently the proposals are under consultation and do not prevent additional claims being made before properties are sold – although it is likely that a 1-2 year period for submitting such claims will be imposed. We would therefore advise giving urgent consideration to making claims now where no claim has previously been made, or where under claiming has occurred.
Other tax planning opportunities such as considering transferring properties within group companies with CAA 2001 s198 elections for £1 to ensure all the capital allowances that have been claimed are retained. Going forward the tax written down value may need to be passed to the purchaser on sale of the property.
CapAll Solutions offer a FREE CAPITAL ALLOWANCES REVIEW to all commercial property owners.
In the light of current uncertainty, it is advisable to have your property or your client’s property reviewed to ensure that this valuable tax relief is not lost.
In a few months time it may be too late!
Contact:
Lisa Mulkerns or Manus O’Hagan or 028 30265662.
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