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Capital allowances: Duty of care

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21st Nov 2013
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Previously on AccountingWEB I have discussed capital allowances and the difficulties of accurately assessing and processing them when it comes to fixtures, fittings and integral building features, explains STax founder Andrew Stanley.

s187a & s187b CAA2001 (contained in Finance Act 2012) changed how the transference of capital allowances work when a building changes hands. Mandatory pooling is with us from April 2014. In short if capital allowances have not been correctly pooled, recorded and a transfer value fixed, the opportunity to claim them simply disappears.

Taxpayers who have not been advised correctly stand to lose substantial sums, hundreds of thousands of pounds in some cases, and will in many cases look for someone to blame. But who owes the duty of care here?

As we saw in Clarke v Iliffes Booth Bennett [2004] a solicitor has a duty of care to understand and advise on every facet of a contract they are instructed on, regardless of what their care letter states. We would envisage that if put to test this would extend to capital allowances in a commercial conveyance.

However they will often look to shift the duty of care by telling the taxpayer to speak to their accountant, this might be you. If you are providing general accounting services it is unlikely that your engagement letter covers the transference of capital allowances in a property deal. However if you do give any advice to your client, you now owe the duty of care, even if you are not being paid for your input.

If you are to give advice it would be prudent to put in place a separate engagement letter and be 100% sure of what you are advising your client to do. This has always been good practice but is essential now in light of the recent Mehjoo v Harben Barker [2013] ruling.

If in any doubt refer to a specialist rather than risk tabling partial advice. The following quote sums this situation up well: “The graveyards are full of middling swordsmen” [Gaius Octavian Ceasar, Rome 2005], so don’t be one of them!

Act now

Over the coming months accountants have a window of opportunity to put measures into place to ensure they have access to the specialist knowledge required to protect their clients’ interests and up hold their duty of care. Come April 2014 clients stand to gain or lose substantial amounts. Practices that add value in this area could stand to benefit greatly whilst those that overlook it may find themselves exposed.

Further reading:

Andrew Stanley is the managing director of STax, a firm of tax advisers specialising in capital allowances and real estate related tax matters.

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