Terminology of Capital Allowances (CAs)
- A specific requirement in legislation or of a principle, rule, outcome or other mandatory provision in the SRA Handbook.
The Pooling Requirement and Fixed Value Requirement rules will mean that the CAs issue must be dealt with at the point of sale, accompanied by documentation which will, it is assumed, guard against erroneous claims.
Where a vendor has claimed allowances, the vendor and purchaser must make an election under Section 198 or 199 of the Capital Allowances Act 2001 (as appropriate) within two years of the date of completion setting out the value of the fixtures.
The vendor must bring the value into account as a disposal value in its CAs computation; the purchaser should then be able to claim CAs on this amount.
- Outside of a regulatory context, good practice for most situations in the Law Society's view.
In the case of the SRA Handbook, an indicative behaviour or other non-mandatory provision (such as may be set out in notes or guidance).
You should include a section 198 election or written statement in the contract and supporting documentation. Not doing this could result in a loss for your client and could even amount to a breach of contract.
If your client is a taxpayer, then provisions should also be included in heads of terms to be negotiated.
Non-taxpayers should still obtain the requisite information about CAs even though they themselves cannot claim the relief. If they fail to do so, the CAs won't be available to subsequent purchasers, which will reduce the property's value.
Whether you are acting for the seller or purchaser, you should raise the issue of CAs with your client as early as possible. Failing to do so could result in delays or financial loss to your client.