Capital Allowances Bill 2012– Fixtures Post Budget Clarification

April 2012 – April 2014 is the Transitional Period

Transitional Period: Any property that is sold during the April 2012 – April 2014 Transitional Period will not be subject to Mandatory Pooling or section 198/199 elections.

However if the same property is resold again within this period then it will become subject to Mandatory Pooling and section 198/199 elections.

In practice, if Mandatory Pooling and section 198/199 elections are not done, the client could lose out. If a section 198/199 election is not completed correctly this could result in any agreed apportionment of pooling becoming unenforceable,

Retrospective Purchases (Purchases Pre April 2012).

Any property purchased pre April 2012 and sold ONCE during the transitional period will not be subject to Mandatory Pooling and section 198/199 elections.  If the property is resold during the same period it will be subject to Mandatory Pooling and section 198/199 elections.

This means that it is more beneficial for an owner who is not intending to sell in next two years to claim capital allowances now to avoid the benefit being eroded by inflation.

An owner intending to allow a purchaser to claim capital allowances on the sale price of the property will have to sell during the transition period as claims after 2014 will only be made on the amount paid for the property by seller.

Post-April 2014.

All and every property sold after April 2014 will be subject to Mandatory Pooling and S198/199 elections.

It is the best interests of the client and best practice for the professional advisor –solicitor or accountant – to instigate the process of Mandatory Pooling and S198/199 elections now and during the transitional period.

We would also offer the following points of advice in the current situation:

• Advisors should become fully aware NOW of the implications of the new rules for fixtures that will become effective from April 2012 and 2014.
• These new rules will necessitate that advisors amend their current approach to dealing with capital allowances on property transactions.
• Capital allowances should be considered and dealt with at the pre-contract stage of each and every property transaction.
• As always, specialist advice should ensure that the advisor safeguards the client against avoidable loss and correct procedure will also enhance tax relief and preserve investment value.
• It is best practice to run one sales and purchase process that is fully compliant for Mandatory Pooling for all after 1^st April 2014

Portal Tax Claims Action

We have contacted HMRC & the Treasury for their clarification and guidance on this issue. They have replied by stating that the final 2012 Finance Bill will be published on the 29^th March and their head of technical will call us to answer our concerns early next week. We will email you accordingly when we get the appropriate responses

If their clarification supports the above assumptions then the whole situation has become more complicated as the client advisors will have to deal with pre and post situations up to 1^st April 2014.

Any retrospective purchaser that sells during the transition period and is not advised correctly with regards to capital allowances may seek to instigate negligence procedures against their advisor.

Portal’s comprehensive section 198/199 service offers free guidance including CPSE completion and contract amendments and provides the solicitor and accountant with the opportunity to put a trouble free and simple system into place immediately.

Our service will not only enable the solicitor and accountant to provide the client with the best outcome but will also mitigate the risk of negligence in the “blame to claim” culture.

Please contact Portal Tax Claims on 0845 000 0450 if you would like to know more about how we can help you and your clients.

We will continue to update you.