Supporting the Legal Sector

What the New Rules Mean

If the 2012 Fixed Value Requirement or the 2014 Pooling Requirements are not met, then the Buyer and any future owners will never be able to claim Capital Allowances on those fixtures.

For the business owner, this means an immediate and irrevocable loss of an important tax benefit and, for some types of commercial property, a reduction in future sales value.

For a Property Adviser, the complexity of the new rules raises the prospect of their advice being called into question, potentially exposing their professional indemnity insurance.

The message is clear for both groups:

• If you, or your Clients, are contemplating the purchase or sale of commercial property then it’s essential to get the best advice you can on capital allowances.
• If you, or your Clients, have bought or sold a commercial property since April 2014 then we would encourage you to revisit transactions.

Matt Sullivan, Head of Business Development,The Law Society, added:
“It’s only a matter of months before a seismic shift takes place in the commercial property market, but too few parties have made anywhere near the necessary preparations. Lawyers, especially, need to be fully up-to-speed with their obligations under the new regime, as failure to do so could cost their clients sizeable amounts in lost tax relief.”

Many businesses are missing tax allowances and your Clients could be among those who risk losing this benefit. It is estimated that the majority of owners of commercial properties haven’t claimed because the dormant tax benefit in embedded fixtures is often overlooked. In addition, changes in the Finance Act from April 2014 also mean that tax allowances for commercial building fixtures could be lost to a new Buyer and all future owners.

You may not have heard about this property relief because it requires a specialist Surveyor and tax expert to review your Client’s buildings and books.

When a property changes hands there was previously no requirement for Sellers and Purchasers to agree a single disposal/acquisition value for “Property Embedded Fixtures and Features” (PEFFs) within the overall sales price. What’s more, there was no time limit on when, if ever, PEFFs are highlighted however, this has now changed for transactions post April 2014.

It is important to understand how these changes have affected entitlement to Capital Allowances for PEFFs.