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S198 election on overseas property?

S198 election on overseas property?

I am aware that a property investor investing in overseas commercial property can claim capital allowances on the same basis that they can on UK property.  Likewise if there is a surplus of allowances, these can (currently) be offset (without a cap) against general income – S121 ITA 2007.

OK so far so good. 

My question is that on a future sale what happens?  Do the allowances reverse or can the taxpayer make use of S198 CAA 2001 provisions to sell the asset for an agreed tax WDV / £1 even though the purchaser could very well be a non-UK taxpayer.  Is there anything to stop a 198 election from being effective? I know there is a requirement under S201(3)(f) CAA2001 to have tax district and ref numbers for the persons making the election but there is actually no stipulation this has to be UK references??!

Any help would be much appreciated.


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By plummy1
03rd Aug 2012 14:28

Hope this helps

Dear Jason,

I have written a blog on the subject of capital allowances and holiday lets which can be read here:-


Basically I think the legislation you are referencing is out of date because as from tax year 20011/12 you cannot offset losses from the furnished holiday let against any other income but only use the capital allowances to protect profits or produce a loss in the FHL business itself. This is way the capital allowances claims market for FHLs has died a bit of a death. Having said this of course the 2010/11 return still remains open for amendment until 31/01/2013 so if the property met the qualifying criteria in this year the losses in the FHL business can be used to protect other income from taxation. 

In respect of the S198 election agreement you could produce one as a belt and braces approach to the transaction valuing the benefit to the purchaser as a £1. They should not have a problem with this as they are unlikely to understand its relevance if not paying tax in the UK. Personally I would be impressed to see a Section 198 Election Agreement produced in these circumstances regardless of the tax references placed on it.

If I can be of further help let me know and if I have got any of the above wrong please could someone enlighten both of us.

Kind regards





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