+44 (0) 20 7329 1300

Drafting For Purchase Contracts And CPSE Capital Allowances Responses

Since April 2014 the legislation has been substantially tightened for capital allowances when buying commercial property.

The allowances can be significant and often represent around 10%-25% of the purchase price of the property.  There are standard Commercial Property Standard Enquiries (CPSEs) for use by the property lawyers, intended to establish the extent of any allowances available to the buyer in acquisition.

In principle this is a good idea but in practice, without assistance of a capital allowances specialist, allowances are often lost for the following reasons;

  • Absence of appropriate contract wording to protect buyer’s position
  • Incomplete responses to CPSE replies
  • Changes in professional advisors and poor record keeping by the seller
  • Limited knowledge of capital allowances history of the property by the seller
  • Usually tailored capital allowances contract enquiries are needed to properly understand the seller’s position.

Background – Rule changes from 1 April 2014

Capital allowances previously automatically followed ownership of the property, if nothing was agreed between buyer and seller.

In contrast, under the HMRC Mandatory Pooling effective for transactions since 1 April 2014 the allowances available to the buyer will hinge on assistance given by the seller.  The buyer receives no allowances if the seller was entitled to allowances and nothing is agreed with them.

From April 2014 there is a 24 month window from the date of completion for the buyer to meet the legislative requirements in CAA2001 s187A.  Failing to do so means a buyer stands to forfeit any allowances they may otherwise be entitled to from the seller.

It is important the buyer makes the seller aware of their interest in capital allowances at the outset.  Lovell Consulting can supply appropriate wording for;

  • Offer letter
  • Heads of terms
  • Contract

It is important the buyer persuades the seller to cooperate as there is a risk of losing all allowances if nothing is agreed.  This presents an opportunity for both parties to maximise tax savings.

Action required of the seller

If the seller is a UK tax payer they must first claim their full entitlement to allowances, by including them in a tax return, before they can be passed to the buyer.  Secondly, they must sign a joint tax election with the buyer agreeing the quantum of allowances to pass to the buyer.  These are two significant hurdles with potential to disadvantage buyers without specialist capital allowances advice.

The positive is prior to exchange it is only necessary to gain the seller’s cooperation in principle to take the steps needed by including appropriate contract wording.

Pre-contract capital allowances enquiries

A new version of Property Standard Enquiries (CPSE.1 Version 3.3) was published in February 2014 in response to the new Mandatory Pooling rules.  However, without specialist assistance they are unlikely to elicit full details needed by the buyer.

The purpose of the CPSEs is to;

  • Establish whether plant and machinery allowances are available to pass to the buyer based on what allowances the seller has claimed and has also what they could have claimed
  • Establish potential value of those allowances
  • Understand what actions need to be followed, and when, in order for the buyer to become entitled to the allowances

Negotiations can follow receipt of seller’s detailed responses to enquiries to include in the contract the procedural steps needed for allowances to pass from the seller to the buyer.

Recommended Approach

In practice it is essential for capital allowances to be raised as early as possible in the transaction, preferably at offer letter stage / head of terms stage.  A specialist can provide appropriate contract wording particular to the circumstances of the case.

Without specialist capital allowances advice the seller may lose allowances and the buyer may not get any.  This is a potential professional indemnity risk for lawyers and accountants.  It is essential specialist advice is taken.

Article by Mark Hoskyns

Back to News

OTHER NEWS

john

OTS Review on Capital Allowances and Accounts Depreciation

Lovell Coffee Seminar Oct, 1 and 15 Nov 2017

New Capital Allowances CPD Semimar Dates

EGA_220717_301_REV

20 Years of Capital Allowances

20170719_133055

Lovell Consulting Capital Allowances Student Prize Winner 2017

Lovell Coffee Seminar Sep, Oct and Nov 2017

New Capital Allowances CPD Seminar Dates

Cabot_Square,_Canary_Wharf_-_June_2008

Pension Funds and Capital Allowances Interactions

lexis

Lexis Nexis Webinar – Capital Allowances in 2017

Lovell Coffee Seminar May and June 2017

New Capital Allowances CPD Seminar Date & Speakers Announced

Kaca_film_40%

Capital Allowances and Demountable Partitions; To Move or Not to Move?

1966_Sunliner_caravan_(6262976143)

Employees Claiming Capital Allowances: Caravan Case Demonstrates Hurdles!

Midland_Hotel,_Morecambe,_Lancashire,_England-31Aug2010_(3)

Capital Allowances, Corporation Tax Loss Relief & Interest Deductions – Act Now

British_Houses_of_Parliament

Corporation Tax Loss Relief & Interest Deductions: Capital Allowances

Bar

New 2017 Capital Allowances CPD Seminar Dates Announced

1872042_8c5756ec

Capital Allowances, Trustees and Tax Havens

buildings-1245684_960_720

Interview: A Little Capital Allowances Knowledge Can Be Dangerous

3638890517_7161f4c331_z

MBL Seminar Dates Announced (Capital Allowances in Retail, Hospitality & Offices)

new-picture-56

2016 Lovell Consulting Capital Allowances Art Prize Voting Begins

1

Capital Allowances in the Retail Sector

Palm with a plant growng from pile of coins

Free Cash, Tax Savings & Capital Allowances for SMEs Going Green

2276927_4f106630

Student Accommodation & Capital Allowances

blake-h-portrait

Lovell Consulting Capital Allowances Student Prize Winner 2016

pexels-photo

Capital Allowances within Offices

MBL Webinar

MBL Webinar – Capital Allowances for Property Surveyors

2414578731_82c451232d_b

Capital Allowances & Data Centres

taxjournal-logo

Tax Journal Interview: One minute with…John Lovell, Capital Allowances Specialist

Odeon_Barnet,_High_Barnet,_EN5_(4497059063)

Claiming Capital Allowances and / or Repairs

york-united-kingdom-empty-street

Commercial Property Standard Enquiries: Capital Allowances

New Picture (54)

LexisNexis Webinar – Tax for General Practice & Capital Allowances

England1_144

Artful Plant: When Capital Allowances may be Claimed on a Painting

New Picture (44)

LexisNexis Webinar – Commercial Property Law & Capital Allowances

Thumbs_up_bluefilter

New Capital Allowances Team Appointment – Glenn Ramos

New Picture (48)

MBL Webinar for Property Lawyers and Tax Advisers (Capital Allowances)

Gherkin_stitch

Fundamental Changes to Interest Deductions & Impact for Capital Allowances

playground-99509_960_720 - Copy

Capital Allowances within Childcare Facilities & Schools

Royal_Coat_of_Arms_of_the_United_Kingdom_(HM_Government).svg

John Lovell Comments: 2016 Budget – Impact on Capital Allowances: Commercial Property

Thumbs_up_bluefilter

Capital Allowances Team Announcements

MamaMarseille

Better Call Lovell for Capital Allowances

0928aa_ee33b990a61e441d83d6b257a590d366

Lovell Consulting Capital Allowances 2015 Art Prize

Lexis

LexisNexis Capital Allowances Webinar with John Lovell & Ronak Shah

x-default

Plant in Garden Centres: Claiming the Right Kind for Capital Allowances

1280px-Serpentine_Gallery_Pavilion_5_(2732918169)

Can an Accountant Claim the Capital Allowances without Specialist Support ?

New Picture (33)b

John Lovell Capital Allowances talk at Chartered Institute of Taxation Conference

Albert_dock_at_night

Enterprise Zones & Capital Allowances

14228109324_186f38de00_o

Capital Allowances & Landlord Contributions to Tenant Fitting Out Works

wall-of-keys

10 Key Qualities To Look For In A Capital Allowances Advisor

aMaiFZY

Capital Allowances within Private Member Clubs

iStock_000005218304Small

Effective Dealing with HMRC for Capital Allowances

Taxation Feedback Article

Taxation Feedback: Capital Allowances

rooms+cover

Capital Allowances within Restaurants

Poole2-VTerraceC

Capital Allowances within Nursing Homes

Little Book

Little Book of Big Capital Allowances Savings

xglobal-REIT-ETF.jpg.pagespeed.ic.U54haEqpZd

Real Estate Investment Trusts: Get The REIT Advice on Capital Allowances

Siemens-6MW-Wind-Turbine

Wind Turbines and Capital Allowances

cont land

Contaminated Land – The Big Clean Up for Capital Allowances

New Picture (20)

Capital Allowances & Furnished Holiday Lets

CT_Lobby_01-of5a411

Capital Allowances Hidden Gems within Hotels

tax_1815371c

Helpful Tips for Claiming Capital Allowances in Tax Returns

Tax-question_300_2

Why Do I Need A Capital Allowances Specialist?

seedling

Land Remediation Relief & Capital Allowances Q&A

Inspired Capital Allowances Savings_Page_1

Inspired Capital Allowances Savings

580_Image_homes_new_oldham

Private Rented Sector (PRS) & Capital Allowances: Key Planning Points

The Great Hall, University of Reading

Lovell Consulting Capital Allowances Student Prize Winner 2015

George Osborne Summer Budget 2015

Summer Budget 2015: Property Tax Updates & Impact for Capital Allowances

???????????????????????????????

The Benefits of Claiming Annual Investment Allowances

LN

Lawyers Should Seek Specialist Capital Allowances Advice

Lovell_Consulting_Groups22-1500w

The New Environment For Capital Allowances

Capital Allowances demolition costs

Capital Allowances – Demolition Costs

Capital Allowances - Asbestos Removal

Capital Allowances – Asbestos Removal

wooden-judges-gavel-1024x678 (2)

Capital Allowances Case Summary: Bowerswood House Retirement Home

wooden-judges-gavel-1024x678 (2)

Property Tax Case Summary: Terrace Hill (Berkeley) Ltd: Impact for Capital Allowances

OLYMPUS DIGITAL CAMERA

Business Premises Renovation Allowance (BPRA) Case Summary: Senex Investments

Construction Expenditure image

Capital Allowances Savings for Construction Expenditure

58767673

Recent Capital Allowances Case Study

wooden-judges-gavel-1024x678 (2)

Capital Allowances Case Summary – Rogate Services

crest(300x380)

Lovell Consulting Capital Allowances Student Prize Winner

wooden-judges-gavel-1024x678 (2)

Capital Allowances Case Summary – LLPs and AIA

Kirsty and Mike 2

New Capital Allowances Team Members

See Saw 2-10 (2)

Lovell Consulting Capital Allowances 2014 Art Prize

EGA_030514_301.indd

Recent Lovell Consulting Press Coverage: Capital Allowances

Lovell_Consulting_Groups05

April 2014 Capital Allowances Fixtures Rules

budgetbox_1107228c

The Budget of 19 March 2014 Announced a Number of Capital Allowances Changes

Lovell_Consulting_Groups22-1500w

Capital Allowances Case Update – The Granleys

Holiday Lets 2

Capital Allowances on Furnished Holiday Lets

wetherspoons-woking-01

Capital Allowances Case Update – Wetherspoon

budgetbox_1107228c

The Budget of 23 March 2012 Announced a Number of Capital Allowances Changes