A client owns commercial property via ltd company that he wants to sell. The previous accountant when the property was purchased capitalised all as land and building and no capital allowances were claimed. In 2017/18 he did renovations and again all of the renovations were capitalised under property, except for approx £6k that was taken to plant and machinery and capital allowance claimed. Now the client has gone to a specilaist capital allowance firm for a report and they have come back with a valuation of approx £1m that should be in 18%pool and £0.5m that should be in 6% pool. Client has said as part of thee sale he wants to go via S198 election.
Would really appreciate if someone can answer the question please. The year end accounts for 2020/21 are in the process of being prepared. Can I include the renovations of £1.5m in 2020/21 accounts as additions and claim 18% and 8% alllowances. Will I be able to claim allowances for the previous years too or can only claim for one year 2020/21.
The prperty is expected to be sold in Sep this year. The year end is March. On sale can I claim e.g. 6 months allowances for April to September, or in the year of sale no capital allowance is allowed.
I would really appreciate a reply. I have tried seraching for this but so far have had no luck.
Kind regards
Replies (16)
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" Now the client has gone to a specilaist capital allowance firm for a report and they have come back with a valuation of approx £1m that should be in 18%pool and £0.5m that should be in 6% pool. Client has said as part of thee sale he wants to go via S198 election."
I would leave this to the specialist
You were not involved when this started
Client chose specialist
Let specialist,selected by client, accept all responsibility
Are you really able to comment on specialist opinion?
Make clear to your client that you are relying completely on the expertise of the specialist and accept no responsbility.
Any challenge by HMRC will need to be dealt with by client's cchosen specialist.
How recent is this client?
Consider your PII
I would not be doing what you are doing without making very clear that I accept no responsibility confirmed in writing from the client.
Judgement on the values is impossible and way over the limit of my comfort zone
I regularly inform clients that I am submitting their figures on an execution only basis and accept no liability should their figures be challenged and found to be incorrect
You can add the expenditure to the respective pools for any years that are open ie able to be amended.
Whether you can claim allowances in year of sale will depend on whether there is a continuing property business.
Bear in mind that the purchaser may also want to benefit from a s198 election so the benefit of allowances transferred should be factored into price discussions.
I disagree that the matter should be left to the capital allowance specialists - their role is to quantify the qualifying expenditure but are rarely in a position to advise on the optimal use of allowances, which should be the responsibility of the tax adviser.
I disagree that the matter should be left to the capital allowance specialists - their role is to quantify the qualifying expenditure but are rarely in a position to advise on the optimal use of allowances, which should be the responsibility of the tax adviser.
I agree with you in principal. However, it will all depend on the capacity in which the experts were advising. Some give a ball park figure (i.e. don't actually do much other than over excite clients), some give a full report of the claim value (and then we deal with HMRC), others will file the report and an amended return with HMRC (giving the starting point for the current return).
Generally I have found such experts to be more than willing to converse on the matter. My only bug bear is that they tend to act and submit embedded CA claims (and revised returns) without sending them to me to review (although, that's as much the client's fault as theirs)!
You need to amend the prior year.
Not sure if you understood my point about the seller continuing to carry on a property business. Although re-reading the question, it seems they won’t be. No WDAs in period of cessation - only balancing adjustments (which might be £zero).
That is why I would always let the specialists deal with quantifying the expenditure and then dealing with the actual claims myself.
You can only claim the allowances that you are entitled to for each year. So you need to amend the earliest return that you can, claiming WDA on the value introduced to the pool(s) and WDAs etc for subsequent periods (also amended where appropriate) will follow their natural course.
Whether TWDV is the appropriate figure for the s198 election will depend on what the parties agree.