In most cases, solicitors acting for clients on a purchase or disposal of a commercial property rarely receive information which will satisfy the position of the Capital Allowances. As a consequence, if enquiries are not made in good time pertaining to the amount of Capital Allowances available on a transaction, they can be a sticking point, delay the transaction and potentially lead to lost tax savings.
Capital Allowances are often incorrectly stated as not applicable in the CPSEs, or the default position taken is a £2 s198 election in Sale and Purchase agreements. However, this often does not reflect the actual position nor the most favourable commercial agreement for either the seller or the buyer, with financial implications to either party.
Specialist Capital Allowances advice, ideally at Heads of Terms stage, can help reduce the risk associated with not correctly addressing the Capital Allowances on sale; having the draft contract clause wording reviewed prior to exchange is key in order to protect the allowances for either the seller or the buyer.
On a property purchase of £5m, the total tax deduction could be up to £300k for a corporate entity, or more if an LLP; failure by lawyers to seek the correct advice can expose themselves open to both reputational and financial risk if tax savings are either missed or have to be repaid to HMRC.
For expert Capital Allowances advice on the required due diligence on transactions, please contact one of our team to help.