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section 198 caa 2001

Company A bought a property for £1 million in 2009,

£100,000 qualified for capital allowances as integral features (special rate pool) (current TWDV - say £75,000)

£50,000 qualified for capital allowances as furniture and fittings (but not special rate pool) (current TWDV - say £30,000)

Company A is to sell the Property for £2million this year, under CAA 2001 it has been agreed that the proceeds for the sr pool and general pool amount to £50,000 and £20,000 respectively meaning capital allowances will continue to be available after sale.

The gain for CT purposes is as follows:

Proceeds £2m

Cost       ( £1m)

IA            (x )

Gain        y

The £2 million proceeds will include the £50k and £20k included within the above pool proceeds, and the cost will be the whole cost including the fixtures and fittings and integral features from above.

Please note the general pool additions include such items as fire extingushers, carpets etc. This exercise was carried out by a specialist firm.

So although I get double relief on the expenditure which qualified for CA's, I also have to include all of the proceeds within the capital gains calculation and the CA proceeds get deducted in the CA pool?

So the only difference between this transaction and another  non wasting chattel asset which qualified for ca's is that in this case you can adjust the proceeds for CA purposes by this election?

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By blok
15th Mar 2012 20:44

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I agree with everything except for the last paragraph, which I didn't understand.

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By plummy1
31st Mar 2012 23:50

Section 198 Election Agreement

As a matter of interest did you seek to agree the value of the capital allowances at £1 which is the usual negotiating position for the seller on capital allowances where a S198 Agreement is going to be made?

Also claiming capital allowances has no effect on the final CGT position on the property if this is what is being queried.

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