As the year nears its completion, we set out some key tasks to deliver an enhanced return on your property investment or to act as a compliance check list for your year end reporting and tax submissions.
The first “To Do” is for any property asset purchase completed after April 2014, for clients and their accountants, to ensure allowances are not being lost altogether. Here we run through some basic scenarios and highlight the actions required.
With the introduction of new rules, CAA 2001 S187A, for a purchaser to take the benefit of any unclaimed Capital Allowances they must now obtain a s198 election within two years of completing on the deal. We are increasingly seeing potential claims being forgone because clients and their advisors have forgotten or not realised that they can go back and address.
- Check s198 elections submitted for deals completed post April 2014
- If contract is silent you can still go back to quantify the unclaimed allowances
- Can potentially give rise to a “cash back” by submitting the claim typically going back up to two years
- Often irrespective of the contract position, entitlement to claim Capital Allowances can still arise which do not require any election
Here we explain two typical scenarios that we often see:
Scenario 1 – Contract is Silent
Often a contract of sale can be silent for Capital Allowances and often clients and their advisors will look no further, however, our recent experience has shown that whilst Capital Allowances may have been overlooked at the time of purchase, that there is still a window of opportunity to go back and make a claim. To do so you would first have to check your entitlement to claim, which a specialist advisor can determine, then you need to approach the vendor to agree to fix the value of Capital Allowances by entering into an election. Whilst it is advisable to have cooperation clause written into the contract of sale, we find in most cases that vendors are still willing to sign up to elections post completion.
If you complete on acquiring a property on say the 2nd January 2015, you would have until 2nd January 2017 to register the election with HMRC as per CAA2001 S200/201. Noting if the elected value is not already stated in the purchase contract, it will require the quantum of unclaimed allowances to be calculated before submission.
Scenario 2 – Vendor not Claimed as a Non-Tax Payer
The new Capital Allowance rules, under S187A on transactions, apply where the vendor is in the charge to tax and therefore, if the vendor was a non-tax paying entity to the extent there is no prior clamant, the purchaser will have the entitlement to submit a claim. There can be confusion around this point and there are several scenarios that can arise, but in essence if you have acquired from a pension fund, charity or government institution or the vendor held as trading stock, then the new rules allow you to ignore that past owner and go to the next.
You would still have to confirm that no previous “owner” had claimed (CAA2001 S185/S186) on any of the existing fixtures and whilst in some cases a past claim may have been made, there are in most cases still opportunities to claim Capital Allowances dependent upon the timing of the expenditure, but for which no election is then required.