In Glais House v HMRC [2019] TC6945 the FTT agreed that capital allowances on fixtures in a pre Finance Act 2012 sale/purchase agreement were not limited to the vendor’s disposal value, but to its cost.
Glais House (GH) acquired a care home from Kappians Care Homes (KCH) for £1.7m.
The contract attributed £35,001 of the sales proceeds to Fixtures. KCH brought this in as its disposal value.
Following its purchase GH instructed a capital allowances valuation and it identified and GH claimed allowances on £318.792 of fixtures
HMRC argued that sale contract allocation should be taken as the maximum claim for the purchaser.
GH argued that it could claim capital allowances is the proportion of the total purchase price which is attributable to the fixtures “on a just and reasonable apportionment”.
The FTT found that:
KCH had incurred qualifying expenditure totalling £238,912 on the fixtures included in the sales contract.
- GH’s claim was limited to ‘the disposal value, the past owner has been or is required to bring into account’ CAA2001 s185.
- CAA2001 s562(3) provides that all property sold as a result of one bargain is to be treated as sold together for capital allowances purposes and, a just and reasonable apportionment identified £318,792 of expenditure on plant and machinery;
- There was a lack of symmetry between the seller’s claim and the vendor’s disposal value: however that was the case with the pre.FA2012 rules.
- CAA2001 s62(1) imposes an additional limit to GCH’s capital allowances claim being ‘the qualifying expenditure incurred by the person on its provision’, this capped the claim to KCH’s original cost of £238,912.
The FTT also considered capital allowances on cold water systems. No allowances were allowed at the time KCH had installed the system, this did not prevent GH from making a claim, as the 2008 changes to the Fixures Rules allowed such a claim at the time it purchased the home.
Comment
Under post FA2012 rules for fixtures, there is no longer a mismatch: the seller of plant and machinery is required to have pooled all its expenditure and it the buyer wishes to claim capital allowances on that expenditure it must enter into a s198 election with the seller.
Our useful guides
Fixtures: Overview (subscribers' note)
Buyer's Guide to Fixtures (subscribers' note)
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