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What is point of S198 CAA 2001 election?

What is point of S198 CAA 2001 election?

Nursing Home
Selling for £750k
If agreed £700 property/goodwill £50k Furniture and equipment then what is point of joint election under S198 CAA 2001.

The vendor did claim C Allowances in the sum of £150k for fixtures and fittings when an extension was built 10 years ago
Could the purchasers attempt to claim CA on part of the Buildings cost of £700? Could this be binding on vendor?
Any case law or Articles worth reading?


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02nd Aug 2002 17:37

Initial thoughts
Just a quick reply before I rush off so I have not checked all points thoroughly.

As I understand it, the point of a s198 CAA election is to give certainty. This election binds not just the two parties involved but also the Revenue.

In the absence of such an election the Revenue could challenge any figure on which the purchaser claimed CAs. Without evidence to the contrary the Revenue will substitute their idea of market value.

Also, of course, the acquisition value used by the purchaser must be the same as the disposal value used by the vendor. In the absence of s198 an Inspector would want proof that this was the case (eg the sale & purchase agreement). If the vendor has claimed capital allowances the purchaser should find out what figure they are going to use as a disposal value and consider whether this is the best figure from their point of view.

It is also possible to use a s198 election to "have your cake and eat it". It is possible to claim CAs and subsequently sell the property at a loss without having to bring a balancing charge into account. I knew the details once...

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04th Aug 2002 21:57

Two answers
Knuckles you are guilty of double entry.

I was looking through and found the question and posted a quick answer. I have now found the earlier one and agree with the answer there.

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