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Specialist surveyors and Capital Allowance claims

26th Apr 2017
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Capital allowances: the role of the specialist surveyor

Capital allowances when buying or selling property can involve many professionals. Here Jake Iles and Ray Chidell explain the value that can be added by a specialist capital allowances surveyor

Major changes to the capital allowances rules were introduced by FA 2012 and these have created different obligations and considerations for the various professional advisers who may be involved. In this article, we look at the role that may be played by the specialist capital allowances surveyor. To put it another way, what value can the surveyor add to the service being provided by accountants and solicitors when capital allowances are being considered in relation to commercial properties?

Apportionments

The classic role of the surveyor is to make a “just and reasonable apportionment” as required by section 562 of the Capital Allowances Act 2001. The apportionment requires the valuation of land and buildings and of the plant and machinery that make up a building’s services. That statutory principle remains very firmly in place even since the changes introduced in 2012.

Example 1

Jane is buying an office building from John in 2016. John bought the building in his turn in 2007 but has not claimed capital allowances for fixtures (lift, toilets, carpets, etc.). Because of the “pooling requirement”, Jane will only be able to claim allowances if John first adds the value to his own tax computations and then signs an election to transfer that value to Jane. It is very likely that an apportionment will be needed to determine the amount that John can add.

Apportionments are also needed wherever the vendor of a property has owned it since before April 2008. As a result of earlier tax changes, it is unlikely that the vendor will have been able to claim for certain basic costs, including general electrics and lighting, and cold water systems.

Example 2

Even if John – in the previous example – had claimed all he was entitled to, neither he nor any previous owner was able to claim for the cost of the general lighting, for example. Jane, however, may make such a claim. To determine a figure that is acceptable to HMRC, an apportionment approach is needed.

Proving entitlement

Wherever there have been previous owners – before the person now selling – the question of establishing the legal entitlement to make a claim is a fundamental one. This issue of entitlement should always be at the top of the agenda for a competent capital allowances practice, and detective work is often needed – typically involving Land Registry entries – to ensure that any claim that is made can stand up to rigorous HMRC and Valuation Office Agency scrutiny. The following example illustrates the issues.

Example 3

Adam built a new restaurant in 2000 and sold it to Bertie in 2009. Bertie is now selling it to our client Charlene. Nothing was said about capital allowances in 2009 (and no election was then signed) and Bertie has not made any claim.

Charlene can only claim if Bertie first meets the “pooling requirement” by claiming whatever he is entitled to. As no election was signed in 2009, that transaction was subject to the normal apportionment rules – Adam was required to bring in a disposal value using those rules (even though he may not in fact have done so) and Bertie is entitled to claim accordingly, thus opening the way for a claim by Charlene.

But if Adam had bought it from someone else in 2000, it is possible that the two parties signed an election at that time to transfer fixtures for just £1, so any claim is more difficult. Even here, though, the specialist surveyor can focus on new fixtures added since 2000 – which may be identified by way of a site survey – and on any integral features that did not previously qualify.

Analysing new expenditure

When a property is built, there may be a full breakdown of the costs, allowing for a desktop spreadsheet analysis of the expenditure. Sometimes, however, such breakdowns are not available. In that case, a specialist surveyor can use valuation techniques to establish a value that will be valid for capital allowances purposes. Their specialist knowledge of how buildings and their systems work will often allow a higher claim to be made than one based simply on analysing the headings provided by the building contractor.

Technical support

All specialist practices should have experienced capital allowances surveyors on their staff who are happy to defend valuations with HMRC and the Valuation Office Agency. Some such practices extend their range of services by employing and/or engaging tax qualified (CTA, ATT or equivalent) capital allowances specialists. These firms are obviously best placed to use their combined tax and valuation expertise to offer a full technical support service for both accountancy and legal practices in relation to capital allowances claims to ensure the best value is added when buying and selling a property or simply when the property is just owned.

• Jake Iles and Ray Chidell are directors of Six Forward Capital Allowances. Contact on 0800 0787 964 or by emailing [email protected]

This article is taken from “Accounting Practice” the ICPA quarterly magazine. Dedicated to supporting and promoting the needs of the general practitioner. You can find us at www.icpa.org.uk or email [email protected] or by phone on 0800-074-2896.

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