Multi-unit

By mitigating the risk of wrong advice, the accountants we work with have one less thing to worry about and have confidence that we will act quickly and with certainty.

On this occasion, the client in question was newly incorporated property rental business, in the process of acquiring a multi-let industrial unit situated on an established trading estate in the West Midlands.

Why Did Six Forward Get Involved?

We were engaged to assist with contract negotiations and review Commercial Standard Property Enquiries (CPSE.1), section 32, to determine the Seller’s prior treatment of property fixtures, specific to capital allowances. It was quickly determined that the Seller was entitled to claim capital allowances but never took advantage of this tax relief.

Due to the transaction falling after 1 April 2012, the pooling and fixed value requirements determined by FA2012 and CAA2001, s187A and s187B applied and we required the Seller’s agreement to ‘pool and pass’ their unclaimed allowances.

Knowing that at least some of the allowances would otherwise be lost for all future owners of the property, including our client, we drafted a bespoke clause outlining the desired intent of each party and achieved the best possible outcome by obtaining the necessary agreement. The clause allowed the transaction to proceed without unnecessary hold up and the capital allowances work was conducted shortly after completion.

How Did We Help?

Following survey of the property and valuation of the relevant fixtures, we drafted a section 198 election to fix the value of the allowances being pooled and passed. In addition to the pooled allowances from the plant and machinery capital allowances claim, our client was entitled to claim the pre-commencement integral features without restriction, by virtue of the Seller’s acquisition date predating 1 April 2008 (FA2008).

As part of the capital allowances survey, it was important to understand which property fixtures were owned by the tenants (to be excluded from our client’s claim) and which were part of the transaction between the Seller and our client.

By undertaking due diligence, reviewing purchase contracts, and fully understanding the legislation and the relationships between the parties involved, we were able to provide advice and certainty to the accountant and client and eliminate any perceived risk of making capital allowances claim. In doing so, we identified tax savings of circa £56,000 (19% CT rate) for our client.

Relevant Legislation For This Case

Capital Allowances Act 2001 s. 11, 15, 33A, 181

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