Fixtures are plant and machinery which have been installed or fixed in a property and have become part of the building.
- Ownership of fixtures passes with the property to the new owner when it changes hands.
- Fixtures are subject to special rules for capital allowances purposes.
- These allow the owner of an interest in a property to claim capital allowances on any new fixtures he purchases, or on any second hand fixtures that he acquires with the property.
- Fixtures are frequently overlooked when a building changes hands: those dealing with the transaction may not be aware that they exist, or lack the expertise to survey the building.
- If capital allowances have not previously been claimed on fixtures, the new owner is treated as having incurred qualifying expenditure for capital allowances on the fixtures acquired.
- The purchase price of a building including its fixtures is apportioned according to s562 on a just and reasonable basis.
- Reapportioning purchase price may also affect tax goodwill and SDLT.
- All buyers of commercial property should research the capital allowances history prior to acquisition and consider unclaimed capital allowances.
Fixtures are subject to different rates of allowances depending on whether they qualify as:
- Plant and machinery.
- Integral features: subject to special rules and rates of capital allowances.
- Long-life assets: subject to the same rates of allowance as integral features but do not have the same replacement rules.
Any person who is buying or selling a commercial property, or block of flats should consider whether allowances have been fully claimed on fixtures by previous owners. The new owner of the building will be able to claim any unclaimed allowances providing he can establish the history of previous claims.
Further reading:
Seller: should I make a s.198 election to fix sale price of fixtures?
Buyer: should I elect to fix the purchase price of fixtures?
See this case study to see how this all works in practice.
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