S 198 CAA 2001

S 198 CAA 2001

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If a client sells his property to a developer who intends flattening it and building houses there would appear to be no reason why the developer should object to an allocation of part of the proceeds to fixed plant etc.
Suppose the actual cost of the capital allowance pool was (say) £20k. Could the parties to the agreement elect that the value allocated be (say) £40k leaving an untaxed £20k as profit on the pool assets?
What is the revenues view on these matters? Will they accept a percentage of the sale price as an allocation?
If the allocated amount is less than the original cost of the pool assets it would appear the only advantage is timing of the tax charge as the full amount will be deducted from the pool - agreed?

Grateful as always to respondents.
knuckles

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By andy.white.crosherjames
21st Apr 2005 10:16

Confused
Has the current owner not claimed allowances?

If not, a reasonable evaluation needs to be calculated based on the current owner's costs or purchase price when bought the property. The Revenue do not like percentages, but may accept a low percentage, if it is less than they would expect for this type of building.

The allocation to plant under a Section 198 should be for £1, as this is the value you are passing on to the purchaser, not the value you are keeping - this is important.

This allows you to retain the pool value and keep claiming, or if winding up, obtain a balancing allowance.

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