Section 198 and 199 elections on transactions involving real estate
Produced in partnership with Martin Wilson
Section 198 and 199 elections on transactions involving real estate

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

  • Section 198 and 199 elections on transactions involving real estate
  • Position of buyer or lessee
  • Position of seller or lessor
  • Limit to amount allocated
  • Time limit for election
  • Detail required in an election
  • Parties
  • Identification of fixtures
  • Seller's versus buyer's allocation
  • Only some fixtures may be covered by an election
  • More...

This Practice Note describes the law and practice relating to elections under section 198 or 199 of the Capital Allowances Act 2001 (CAA 2001), which are relevant to capital allowances claims on fixtures that change hands as part of a real estate transaction (a property sale or the grant of a new lease).

Where:

  1. real estate property changes hands, or

  2. a new leasehold interest in real estate is granted for a capital sum

capital allowances on fixtures will normally be available to the new owner, or, where a new leasehold interest is granted, the lessee (ie the person to whom the interest is granted). In either case, the seller or lessor will normally need to account for a disposal value.

For more information on the availability and calculation of capital allowances on fixtures generally, including the meaning of a fixture, see Practice Note: Plant and machinery allowances—fixtures.

The default position is that the part of the consideration for the property allocated to fixtures is based on a just and reasonable apportionment (although this may require an application to the First-tier Tax Tribunal as described below).

Alternatively, the parties may elect jointly to fix the amount of consideration to be allocated to any fixtures on which the seller has claimed allowances, which, in the case of:

  1. a transfer of an existing interest in land, such as the sale of

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