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Is a capital allowances claim possible on a gifted property?

A husband purchases a residential property in his own name and then gifts it to his wife. It then subsequently becomes a furnished holiday let meeting the qualifying criteria to claim capital allowances. The question is therefore "Is the wife entitled to claim capital allowances and if so will the basis for this claim relate to the original purchase price?"

My gut instinct tells me a claim is not possible but I am more than willing to stand (or sit) corrected. Pointers to the applicable law in this case would also be appreciated. 

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10th Jan 2013 19:16

PMA on gifted assets

This is an extract from HMRC Cap. Allc'es Manual -

 

CA23040 - Plant and Machinery Allowances (PMA): qualifying expenditure: plant or machinery acquired as a gift

 

CAA01/S14

Sometimes a person brings into use for the purposes of a qualifying activity plant or machinery that they received as a gift. When that happens treat the market value of the gift at the time that is brought into use for the purposes of the qualifying activity as the capital expenditure and treat the person as owning the gift as a result of incurring capital expenditure on it. This means that the market value of the gift is qualifying expenditure. 

 

I hope it is of assistance

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By plummy1
10th Jan 2013 21:45

Thank you.

I am indebted to you for putting me straight on this point.

Thank you very much.

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11th Jan 2013 08:21

Complications

Hi John

Just to add a few points here ...

In principle, allowances are due but there are various potential complications when acquiring from a connected party.

If the husband had originally bought it before April 2008, no allowances would be due for integral features that would not then have qualified for allowances (eg general electrical wiring).

You may also have to watch the anti-avoidance restrictions at s. 214 and 218 (broadly, restriction to original cost). 

No AIAs are due where an asset is received as a gift. See s. 38B at the very end.

Hope those are helpful!

Ray

www.claritaxbooks.com

 

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By plummy1
11th Jan 2013 12:55

Thank You

Ray,

As always thank you very much for this additional information. The property was originally purchased 12 months ago so integral features would be claimable. I will make sure I read the relevant sections you have highlighted on anti-avoidance etc.    

I have bought one of your books recently giving guidance to the owners of hotels on claiming capital allowances. I think it is a very good idea to have produced a series of books aimed specifically at different property sectors. I keep mine with me now as a quick reference guide.

Regards

John

 

 

 

 

 

 

 

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11th Jan 2013 13:08

Books

Thanks John

I normally refrain from plugging our books on this site, but as you have raised it ... .

Glad you found the little hotels book useful. Nevertheless, we have actually just consolidated our three small CAs books into one - Capital Allowances for Business Owners. The rate at which they keep changing the CAs rules is such that we cannot justify re-issuing lots of different editions for different sectors, but this one is bang up to date, with all the fixtures rules and even with the new AIA rate.

All the best

Ray

www.claritaxbooks.com

 

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By JimH
25th Aug 2013 19:07

Connected parties
I've only just found this thread, which may confirm my connected party lament re Integral Features allowances being lost on property owned by connected vendor pre 2008 here:

http://www.accountingweb.co.uk/anyanswers/question/have-connected-person...

Useful reminder, Ray, that AIA is unavailable on a gift. Thanks. My question on above thread is re sale between connected parties which was not undertaken for purposes of accelerating or duplicating capital allowances ... and where the vendor had not operated a qualifying trade for capital allowances. I suspect it's still caught by s214-217.

I hope it's not bad form to present my query across 2 threads - AWeb is such a rich tapestry of related issues for the new explorer.

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