Sale of Buildings

When property owners sell a building and have claimed their entitlement to capital allowances, they should jointly enter into an Election under Section 198 CAA 2001 with the purchaser, agreeing to a disposal value of the Plant and Machinery on which the allowances have been claimed. The maximum disposal value should not exceed the tax written-down value of the Plant and Machinery.

This will not only avoid suffering a clawback (balancing charge) on all or part of the capital allowances benefits enjoyed by the vendor whilst the Plant and Machinery was in their ownership, but it will also guarantee that HM Revenue and Customs will accept the disposal value (within certain prescribed limits).

The statutory period for entering into an Election is two years from signing the Contract of Sale. Whilst it is to the vendor's benefit to jointly elect a disposal value with the purchaser at the time of sale, it may not always be possible until a later date.

PJB can liaise with solicitors and accountants to assist with the preparation of draft contract clauses and Election Notices under Section 198 CAA 2001 to bring the appropriate disposal values of plant and machinery into account on the sale of the property to minimise future tax exposure.