In 2014, a significant shift occurred in legislation that directly impacted capital allowances in commercial properties. This change mandated that capital allowances must be documented within two years of a transaction. However, it's important to note that this doesn't necessarily mean they have to be claimed within this period, but they must be dealt with and documented.
In Capital Allowances: A Reminder 2023, Paul Roberts explains the changing legislation with Capital Allowances and how to deal with them correctly.
The implications of this change are profound. If capital allowances are not addressed within the stipulated two-year window, they are lost forever. This could result in a substantial loss of tax benefits, as capital allowances often encompass embedded items that many don't consider or understand as plant and machinery.
A crucial document in this process is the Section 198 election document. This document is instrumental in determining eligibility to claim the allowances. It is signed by both parties involved in the transaction and essentially calculates and values the capital allowances in the building, deciding who can claim them.
However, the legislation changes do not apply universally. For buildings not subject to a transaction, retrospective claims can still be made. Interestingly, there is no time bar on how far back these claims can be made. This means that even for very old buildings, if they haven't been part of a transaction, the old rules still apply and capital allowances can be claimed.
One of the more intriguing aspects of capital allowances is what constitutes plant and machinery. Under the right circumstances, even works of art or historical artifacts that add to the ambiance of a property can be claimed under capital allowances.
The 2014 legislation also introduced a new rule regarding the calculation of the claim. For transactions post-2014, the claim is based on the vendor's price, not the purchaser's price. This is a significant departure from the pre-2014 rules where the purchaser's price was relevant.
The 2014 legislation changes brought about a new landscape for capital allowances in commercial properties. It is crucial for property owners and potential buyers to understand these changes to ensure they don't miss out on potential tax benefits. As always, professional advice should be sought to navigate the complexities of this legislation.
For the full session, please click here. In this course Paul covers the following topics;
• A general overview of capital allowances relating to commercial property.
• Case studies.
• Key legislation changes.
• CPSE.1 Section 32 & the Section 198 Election.
• What to look out for.
The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article.