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Capital allowances on buildings

Capital allowances on buildings

Hi

I have a limited company client who owns a care home which was purchased in 1991.

We recently instructed Quantity/Land Surveyors to prepare reports to enable us to calculate the fixtures & fittings contained within the building. We used the VOA's preferred method.

We have written to the previous owner of the home to establish whether a claim had been submitted in the past but have had no response despite numerous attempts.

We are about to submit the claim but are worried as we could not establish whether a previous claim had been made. There is a rule whereby if capital allowances have not been claimed since July 1996 then there is no restriction but I am not sure whether this rule is only for purchases made after July 1996 whereas our client purchased in 1991.

Thanks in advance.

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By plummy1
06th Feb 2013 23:51

Entitlement to claim.

There is a requirement to check whether a capital allowances claim was previously made as far back to those owners who owned the property on or after 24th July 1996. As your client owned the property on this date you are free to make a claim.

John Plumridge

www.curtisplumstone.com

 

 

 

 

   

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By mdsergi
07th Feb 2013 10:08

Many thanks for that. That is what I thought, however, after trawling the internet for hours! I began to think that under the old rules ie pre 1996 we would have to go back and check whether previous owners had claimed.

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07th Feb 2013 14:33

Almost but not quite

You will still have to prove that the vendor your client acquired from did not make a claim as per s185 CAA 2001 and, as the decision in Mr & Mrs Tapsell & Mr Lester v HMRC Comms [2011] UKFTT (TC) confirmed, it is the taxpayer who has to do this and not HMRC.

The 24 July 1996 date means that you have consider every vendor who owned the property after this date to ensure there were no prior claims by any of them to which the restriction could apply.

Therefore, if you submit a claim without confirmation that the immediate vendor did not claim, it would be possible for HMRC to deny your client's claim in the event of an enquiry.

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By mdsergi
07th Feb 2013 14:42

Thanks for your reply. Problem I have is that my client bought some of the homes pre 1996 from liquidators and as such is proving hard to get the information. Any advise would be welcome.

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08th Feb 2013 09:35

Not easy

Strictly speaking then if the requirements of s185 cannot be proved then no claim should be submitted.

However, you may take the view that you have taken all reasonable steps to satisfy s185 and in the absence of anything to the contrary a claim can be submitted, though if challenged by HMRC you would then be at the mercy of the Inspector as to whether the claim is valid in HMRC's eyes. There is then the question of what this would mean in tax terms as well as any potential for HMRC to look to levy penalties.

You should fully investigate the history of the properties, the Land Registry can sometimes help in this regard and it may well be possible to establish a value for what the claim could have been for the vendor which you could then use for your client as all s185 is there to do is to try and ensure that allowances are not given on more than the original cost.

I hope this gives you some pointers and good luck.

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By mdsergi
08th Feb 2013 11:37

Many thanks for your comments. Much appreciated.

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08th Feb 2013 12:04

Any reason why the claim is being considered after 21 years?

I was rather curious on the point because I wondered how much of the original F&F was still there and if the replacement costs between times has not been treated as renewals or repairs.

Given the property was not new when it was acquired is this really likely to benefit the client?

Still if you decide to persist, you might try the solcitor who acted for your client on acquisition, he may still have the CPSE1 and CPSE2, the Q&A on capital allowances in these forms may have all the answers you need.

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08th Feb 2013 12:46

I agree

mydoghasfleas wrote:

I was rather curious on the point because I wondered how much of the original F&F was still there and if the replacement costs between times has not been treated as renewals or repairs.

Given the property was not new when it was acquired is this really likely to benefit the client?

We also have a care home client who bought their property in 1999, but have subsequently done extensive renovations on which we have claimed every possible capital allowance that we could identify.  Indeed, I think that it is the normal practice of care homes to keep their facilities up to date by incurring such renovation costs.  When I pointed out that a surveyor could only base his assessment on what he could see now, most of which had already had capital allowances claimed in full, and that someone would then have to undertake a massive exercise (at some considerable cost) to eliminate the capital additions claimed over the past 13 years, the client decided to forego the possibility of claiming a few remaining capital allowances and did not proceed with the survey.

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By plummy1
09th Feb 2013 01:01

CPSE1

mydoghasfleas wrote:

Still if you decide to persist, you might try the solcitor who acted for your client on acquisition, he may still have the CPSE1 and CPSE2, the Q&A on capital allowances in these forms may have all the answers you need.

I don't believe the CPSE1 form was introduced until after 24th July 1996 so for a property purchased before this date this form will not exist which I think is relevant to the case in hand.

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08th Feb 2013 12:07

Further to dunhamsjd's post, my reading of s.181, CAA 2001 suggests that the 'old' rules apply for any purchases before 24 July 1996 and therefore, the claimant would be required to satisfy the burden of proof that no previous claims had been made, which of course, would be particularly difficult for purchases over five or six years ago. 

Following the aforementioned FTT case referred to as 'The Granleys', HMRC have been emboldened to take a more stubborn stance, particularly with the amount so-called capital allowances advisors in the market who do not understand (or simply fail to apply) the legislation appropriately.

It has also been suggested that a client should clearly disclose any assumptions taken, lest they fall foul of the penalty regime if the claim is denied. 

In conclusion, the client will be relying upon a lenient stance by an Inspector. 

 

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