Transfer of business premises

By Tolley

The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Transfer of business premises
  • Capital allowances ― fixtures
  • Buildings Allowances
  • Rollover relief
  • VAT
  • Stamp Duty Land Tax
  • Share sales

This guidance note summarises the factors to take into account on the transfer of business premises as part of a trade and asset sale. Please also refer to the Capital allowances ― property transactions and fixtures guidance note.

Capital allowances ― fixtures

Buildings usually contain fixtures, ie items which are attached or placed permanently in the building. Examples of fixtures include:

  • lifts and escalators
  • heating, lighting and electrical systems
  • alarm systems
  • sanitary appliances, and hot and cold water systems
  • telephone and data installations

When a property is sold, ownership of the fixtures will generally pass to the purchaser by default. However, it is often not understood that the right to capital allowances on those fixtures also passes by default. It is important to understand the implications of this type of transaction so that an optimum capital allowances position can be maintained.

In the absence of an election under CAA 2001, s 198 (whereby the buyer and seller jointly agree the value of the fixtures for tax purposes), the default value of these items (which will be the purchaser's capital allowances cost and the seller's disposal value) is a 'just and reasonable' apportionment of the total purchase price (see CAA 2001, s 562). However, the default value cannot exceed the amount on which the seller claimed capital allowances (see CAA 2001, s 185).

In most cases, assuming that the property (and hence the fixtures) is sold for more than the original cost, the result will be that any capital allowances previously claimed by the seller will be clawed back, ie reversed, and the purchaser will be able to claim on the seller’s original cost.

Amounts allocated in the sale and purchase agreement are irrelevant, unless they reflect

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