Property transfer - S198 election

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Company A transferred a property to its holding company at book value. Company A had previously claimed embedded capital allowances. To enable company A to continue claiming WDA, is it necessary to make an S198 election for a nominal amount, such as £1? 

Any guidance on this matter would be much appreciated, along with any other considerations that should not be overlooked. 

Thank you!

Replies (6)

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By Ruddles
20th Feb 2024 18:40

It is not a question of being able to continue to claim WDAs. It is more a case of A having to bring in a disposal value - which can be established by a s198 election.

Was it a standalone transfer or part of a transfer of trade and assets?

Was an SDLT return filed?

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Replying to Ruddles:
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By QLis
21st Feb 2024 17:58

No trade has been transferred. Company A transferred the property only. Our client has already filed the SDLT return. Additionally, there are fixtures on the balance sheet that must be removed as part of the transfer. As you mentioned, entering disposal values for Capital Allowances purposes is necessary.

I'm now also considering whether there might be any issues since the property is not rented back to Company A.

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By SteveHa
21st Feb 2024 09:16

Why do you believe that a S198 election would enable company A to continue to claim capital allowances on an asset it no longer owns?

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Replying to SteveHa:
By Ruddles
21st Feb 2024 09:52

In theory, it would. Although a disposal value needs to be recognised, if that value is only £1 pretty much all of the residue on the pool will continue to be available for WDAs for A. That, after all, is usually the reason for a £1 election - so that the allowances, past and future, stick with the transferor.

Businesses effectively claim WDAs all the time in respect of assets that they no longer own.

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Replying to Ruddles:
By SteveHa
21st Feb 2024 10:53

But surely the claim would be for a final balancing allowance, and not ongoing WDAs.

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Replying to SteveHa:
By Ruddles
21st Feb 2024 12:48

Only if there was a cessation of the qualifying activity

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