The new Capital Allowances for Fixtures legislation may have been drafted over two years ago, but its impact is very much an issue for the present and near future.
Myriad summaries, articles and seminars have been delivered to those involved with commercial property transactions and particularly to solicitors who are likely to be at the coalface of such transactions, but does this guidance ensure that the new rules are being effectively interpreted and applied?
Problems exist between the parties to a transaction when one is more sophisticated (or perhaps just better advised) leading to inequality when capital allowances are being dealt with during the transaction. In this situation, one of the parties may not be aware that entitlement to a potentially valuable asset has been inadvertently waived. This problem has been evident for many years but the issue has escalated with the passing of the new rules.
Another disconnect has also been evident since commencement of the new rules (effective from April 2014). Under the ‘old’ capital allowances rules, a property investor would be delighted with a silent contract from a capital allowances perspective. The solicitor would not have much to worry about and the property investor’s capital allowances surveyor could perform straightforward entitlement confirmation before completing a claim for inclusion within the client’s tax return.
Upon commencement of the ‘new’ rules, the client (whether seller or buyer) requires much more input at the pre-contract phase to include entitlement due diligence, appropriate valuation of the capital allowances and advisory services to ensure the benefit can be accessed and realised before a claim is even envisaged. These services must now be delivered in a time critical fashion but we are fielding many calls from concerned investors or solicitors who must delay transactions to ensure capital allowances are dealt with because they have not taken appropriate advice at the outset. Such a delay relating to capital allowances was very rare under the ‘old’ regime and highlights the complexity of the current issues.
Unfortunately, the myriad summaries, articles and seminars quite often made the client or their advisor aware that something in the capital allowances legislation was changing but did not provide practical advice on how to deal with the legislation. Therefore the issue was outlined but no solution provided.
The advice is quite straightforward for parties to a commercial property transaction – if you want to deal with capital allowances effectively, you need to ensure you have the right expertise on your property advisory team.
If you or a client has encountered issues as a result of the new capital allowances rules during a transaction please contact Aubrey Calderwood at email@example.com or 028 2564 7022 to discuss.