Capital allowances on fixtures in a property could be lost forever under new rules effective from April 2014. 

If certain requirements are not met on the sale of second hand fixtures after that date, the new owner (and all future owners) will have no right to claim capital allowances in respect of those fixtures.  This could well impact on the value of the relevant property.


Capital allowances may be available when fixtures are acquired on the acquisition of property.  In order to make a claim, expenditure on the fixtures must be included in a relevant pool, with allowances being available on the tax written down value of the pool each year.  

On sale of the fixtures, the disposal value is deducted from the pool and if such disposal value is in excess of the tax written down value, then a balancing charge will arise.

Previously if a buyer was unaware of a seller’s disposal value, the buyer might attribute a higher value to the fixtures resulting in capital allowances being claimed by both buyer and seller on the same expenditure. The new rules were introduced to counter these concerns.

Certain persons, such as pension funds, charities or property trading companies are not entitled to claim capital allowances. 

New “pooling requirement”

From April 2014, a purchaser (and/or any subsequent purchaser) will only be entitled to claim capital allowances if the “pooling requirement” is met. 

This means that if a purchaser wishes retain the right to claim capital allowances then broadly:

  • the seller; or
  • if the seller was not itself entitled to claim allowances, then the last owner of the property who was entitled to claim allowances (and owned the building at some time after April 2012),

(the “past owner”) must have allocated its expenditure on the fixtures to a capital allowance pool prior to its sale of the property (though allowances do not actually have to have been claimed).

Post April 2012 “fixed value requirement”

In addition, the “fixed value requirement” introduced in April 2012 must also be met. 

This requires that either:

  • the disposal value attributed to the fixtures be agreed by the past owner and the purchaser from the past owner in a relevant tax election (or determined by the Tax Tribunal in the absence of such agreement) within 2 years of the acquisition of the property; or
  • if the seller was not entitled to claim allowances, a written statement from (i) the seller stating that a tax election was not made and can no longer be made and (ii) a written statement from the past owner stating the relevant disposal value.

Practical implications

The new rules will not apply if a property has been bought direct from the original developer, or from a charity or pension fund which itself bought direct from the original developer. But in most cases, purchasers will need to review the position carefully prior to an acquisition.   It will no longer be possible to ignore capital allowances at the time of acquisition of the property and then claim them later.

A purchaser should:

  • Take advice on the capital allowances position as part of the acquisition process.
  • Obtain information on the seller’s (and potentially previous owners’) capital allowances position as early as possible, and in any event before the sale, to ensure steps are taken to preserve the allowances.
  • If the seller is entitled to claim allowances but has not done so, the sale documentation should require the seller to pool its expenditure prior to the sale (and/or appropriate warranties/indemnities should be obtained).
  • A relevant joint tax election (in the required form) should be made specifying the disposal value, or, if not possible, a direction from the Tax Tribunal applied for.
  • Particular care will need to be taken where the seller is not entitled to claim allowances.
  • Purchasers who are non-taxpayers (for example pension funds and charities) or property traders/developers need to consider the capital allowances position (notwithstanding they themselves are not entitled to claim capital allowances) to ensure that they do not inadvertently cause allowances to be lost for future purchasers.  This could negatively affect the purchase price on a subsequent sale of the property.

Potential sellers should:

  • Review their portfolio to identify whether allowances have been claimed.
  • Keep full records of the capital allowances history of each property.



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