Capital allowances on property sales—pre-contract enquiries
Produced in partnership with Martin Wilson

The following Tax practice note produced in partnership with Martin Wilson provides comprehensive and up to date legal information covering:

  • Capital allowances on property sales—pre-contract enquiries
  • Pre-contract enquiries
  • Definition of capital allowances
  • Capital or trading account
  • Seller's capital allowance position
  • The pooling requirement
  • Sellers who are not entitled to pool expenditure
  • Expenditure by tenants, and contributions
  • Equipment leases
  • Grant of a new lease for a premium
  • More...

Capital allowances on property sales—pre-contract enquiries

This Practice Note is about capital allowance-related pre-contract enquiries on a property transfer. It applies to the grant of a new property interest (eg a lease) as well as to the acquisition of an existing lease or freehold.

For clauses and warranties that should be included in a property sale contract relating to the buyer and seller’s capital allowances position in respect of any fixtures in the property, see Precedent: Capital allowances clauses for property sale contracts.

Pre-contract enquiries

On most property acquisitions, the buyer, through the buyer’s solicitor, should ask a number of standard questions, some of which will relate to capital allowances (purchases at auction may be an exception).

These questions need to be answered by the seller to the buyer’s satisfaction: they are important and can have a significant impact on the buyer’s claim for allowances. Answers such as ‘not applicable’, ‘don’t know’, ‘ask accountant’ or 'buyer to make own enquiries' are unacceptable. Very often, the buyer’s position can be adversely affected by documentation, including the replies to these queries, and there is little or no scope to correct mistakes or omissions that were made before completion. Failure to act appropriately to unacceptable replies from the seller is a common source of claims against advisers.

The most widely used version of pre-contract enquiries is the form CPSE.1 ‘General pre-contract enquiries for

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