Capital allowance & fixed plant claims

Capital allowance & fixed plant claims

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Our clients bought a hotel in 1999 and the proceeds were split between property, goodwill and fixtures & fittings(f&f).
There was a full inventory of the f&f but it wasn't costed item by item - it just had a total value. The f&f inventory did not include fixed plant and the agreement was silent on this.
Using a specialist company our clients made an additional capital allowances claim in 2003 for fixed plant within the property. Although the Revenue accept this they are now disputing the amount originally agreed to be the value of the f&f so that in effect our clients are no better off for having made the claim - can the Revenue do this?
Any comments gratefully received.
Thanks
sharon

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By andy.white.crosherjames
28th Feb 2006 10:46

Advisor
If you have engaged a resonable specilaist they should also be responsible for dealing with the Revenue, and experienced in this area - so you can leave it to them.

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By AnonymousUser
22nd Feb 2006 12:27

From what you say ...
... it seems that the price in the agreement for loose plant is correctly regarded as the price for such plant only. The agreement would not need to specify a price for fixed plant because legally such plant is part of the building.

The natural interpretation is that fixed plant is not included in the figure apportioned to F&F - particularly as an inventory was provided which made it clear what plant was covered. HMRC do have power to apportion consideration for capital allowances purposes where plant and machinery is sold along with other assets - even if the sale agreement apportions the consideration differently (s562 CAA 2001). However, the apportionment must be 'just and reasonable'.

It may be that the inspector simply fails to appreciate that landlord's fittings are part of the property, and since no amount has been allocated then the cost of the building must be apportioned for this purpose on a just and reasonable basis. The inspector is within his rights to ask whether the allocation you are seeking to achieve is just and reasonable but not to read into the sale agreement things which aren't there. However, he seems to be substituting his opinion of just and reasonable over what has been agreed at arm's length. But isn't this outside the inspector's remit anyway? He isn't competent to apportion the value of the property between the building and the fittings. So if you can convince him that an apportionment is needed maybe you should suggest he refers to the DV.

HMRC do however try to get both parties to adopt the same apportionment so if the other party brought in no disposal value for landlord's fittings then while you may not agree with the inspector you can see where he is coming from.

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