Please could someone confirm that my thinking is correct.
We have a client who owns three pubs in partnership with their spouse. The pubs are run under a limited company and effectively pay rent to the partners.
We are investigating the possibility of making a capital allowances claim for the "fixtures" in the property and we have proved that for two of these pubs there is an entitlement to make such a claim. However one of the pubs stopped trading in its second financial year of ownership and now the owners are trying to obtain a change of use so they can live in the property.
My question is therefore, taking into account Section 61 of CAA2001, whether it would be worth us undertaking a capital allowances claim for this client on the pub which has stopped trading. It would seem to me that any allowances we claim could result in a balancing charge when the client effectively starts using the assets for a purpose other than the trade. This is because the assets would seem to have to be accounted for as a disposal at "market value". We are actually within time to claim the AIA on this property but if I am correct this will just cause greater problems when they move into the property.
Could somebody confirm that my thinking is correct as we don't want to attempt to make a claim which is just going to cause an issue for our client further down the line. Obviously we charge a fee for our claims services which again, if I'm correct, is just going to put the client deeper in the poop if we go ahead.
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It is a deemed disposal at market value being a connected transaction as you say. However it will not necessarily cause a balancing charge. I would have thought that the CA's have been claimed in the general pool and the qualifying activity is still continuing (just with 2 premises instead of 3) and so the disposal proceeds allocated to these assets just affect this pool which is grouped with the other properties.
You may want to get some specialist CA advise on how to value the F&F. There is clearly going to a difference of opinion on what is market value - the buyer looks at residential F&F values and the seller commercial use. This might help reduce any reduction in future CA claims.