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I have always understood that the £1.00 figure was because that is the smallest amount to appear in a tax return, so can be identified as a specific addition to or disposal from a pool. Incidentally, these days you probably ought to be entering into s198 elections for £2.00; £1.00 for the main pool and £1.00 for the special rate pool. The benefit is mainly for sellers to fix its disposal value for fixtures forming part of the property being sold. Without a s198 election the disposal value is to be calculated using s562 which might give a higher value than desired. New rules make consideration of the s198 election provisions more important for transactions post 31 March 2014.
Bearing in mind that it will be the Tribunal that will decide the value in absence of a s198 election.
The Tribunal may not always be involved. Their involvement arises only if one of the parties makes an application within the time limit.
s562 applies and HMRC refer to the VOA for the seller's position. Buyer gets no allowances other than perhaps pre-commencement integral features if the new rules dont apply to those assets.
Thanks.
Pretty much as I thought. I was being a little vague with my reference to "Tribunal", simply making the general point that if the parties cannot agree by election then someone else will do it for them - possibly, as you say, resulting in loss of allowances for the purchaser.
You're welcome.
The new rules are a bit of a double edged sword, as the Seller may (under s562) get most or all of its allowances clawed back by the VOA apportionment, yet the absence of a valid s198 or an apportioned amount from the Tribunal will result in no (save for possibly pre-commencement integral features) allowances for the Buyer.
Not sure I understand your question. The effect for the Seller of the s198 election is to retain capital allowances previously claimed or claimable in future. The Sellers' chargeable gain will be the same if no capital allowances were retained. Retaining capital allowances on fixtures in property is almost always beneficial to the Seller.
I understand the question. It is one that is often raised by those that are clueless about the tax treatment of fixtures - and who fail to understand that agreeing how much of the consideration qualifies for capital allowances has no bearing whatsover on the consideration to be brought into account for capital gains tax purposes.
The only potential impact on CGT is where losses are involved (but not for the reason that the above user thinks).
Oh dear - your understanding is indeed wrong.
There is no double taxation. Effectively, the s198 value cannot exceed the amount on which allowances have been claimed by a previous owner. So, in your example, the seller would have had to pool at least £100k of qualifying fixtures. If he has already claimed allowances of £100k then the disposal value simply reverses that - net effect £0. If on the other hand no allowances have actually been claimed the disposal value simply cancels the £100k previously added to the pool - net effect £0.
Look at it another way. Some of the expenditure on the property would both qualify for fixtures capital allowances AND form part of the CGT base cost. Effectively, according to your thinking, relief twice for the same expenditure.
Yes. Although don't confuse yourself by thinking of "including the cost of fixtures" in the CGT calc.
The CGT base cost of the property is (usually) what it was bought for (plus enhancements etc). The CGT consideration is (usually) what it is sold for. The capital allowances treatment is almost entirely separate - the only possible interaction being an adjustment to a CGT loss under TCGA 1992 s41.
Not quite. The s198 election relates solely to fixtures (i.e. those items that form part of the land) The base cost for the property's CGT calculation includes those fixtures (irrespective of whether capital allowances have been claimed, retained or not). So, effectively capital allowances on fixtures can be claimed and retained without affecting the chargeable gain base cost.