CH 11 - Capital allowances - Further computation

Question 1

Which expenditures are allocated to
‘special rate pool’
???

Answer 1

1. Integral features.
2. Thermal insulation of buildings used in a business.
3. Cars with CO2 emissions of more than 50g/km (110g/km for expenditure incurred before 6 April 2021 (1 April 2021 for companies) (see later chapter).
4. Solar panels.

Question 2

List ‘Integral features’ recognisable in SRP
(integral to a building)

CAA2001 33a

Answer 2

1. an electrical system (including a lighting system)
2. a cold water system
3. a space or water heating systems,
4. a powered systems of ventilation,
5. air cooling or air purification and any floor or ceiling comprised in such a system
6. a lift, an excalator or a moving walkway
7. external solar shading

CAA2001, s33A(5)

Question 3

What are fixtures?

Answer 3

A fixture is an asset that is installed or fixed in or to a building such that in law it becomes part of that building.

Such as;
* Lifts and escalators
* Heating, lighting and electrical systems
* Alarm systems
* Sanitary appliances, and hot & cold water systems
* telephone and data installation.

CAA 2001 , s.173(1)

Question 4

What ‘Fixtures’ legislation
allows & aims to ensure

Answer 4

Allows a leaseholder to make a capital allowances claim by treating the leaseholder as the owner of the fixture

Aims to ensure that only amount of the original expenditure on a fixture is wrtitten off over the useful life of a fixture.

Allows to claim capital allowances on 2nd hand fixtures given; fixed value & pooling requirement is met.

Question 5

What are reguirements
to claim capital allowances on the fixtures

Answer 5

Fixed Value Requirement

Pooling Reguirement

CAA 2001 s.187A

Question 6

What requires
Fixed Value Requirement
under 2nd hand Fixtures

Answer 6

Fixed Value Requirement
requires;
- within 2y of completion date for the sale of the property, the seller and purchaser** jointly elect** the amount of sale proceeds attributable to those fixtures under CAA2001 s.198 / s.199
or
- there is ‘just and reasonable’ apportionment of the sale proceeds allocated to fixtures. The apportionment must be (submitted to) ratified by the First-tier Tribunal.

along with Pooling Requirement allows new onwer to claim capital allowances.

CAA 2001 s.187A

Question 7

What reqires
Pooling Reguirement
on 2nd hand fixtures

Answer 7

Pooling Reguirement
- previous owner must have claimed 100% FYA/AIA on fixtures or allocated cost of fixtures to a capital allowance pool.
(this ensure that HMRC are notified of the original cost of fixtures)

along with *Fixed Value Requirement *allows new onwer to claim capital allowances.

CAA2001 s.187A

Question 8

How ‘pre-commencement integral features’
can be claimed?

Answer 8

(this applies for some items which were not eligible for cap.allow prior April 2008)

Purchaser needs to do in respect of these fixtures is to;
prepare an apportionment of the purchase price under CAA 2001, s.562 & claim capital allowances in the usual way.

this approportionement does not need to be ratified by Tribunal.

Question 9

FOR CGT purposes
What happens to P&M when a property is
sold again for a loss

Answer 9

For CGT purposes
The amount of capital allowances retained reduces the amount of the allowable loss.

e.g. £80k origianl cost less disposal value of £35k = £45k of retained cap.allow. reducing original cost ,thus reduces loss by £45k

(amount of CA retained can only reduce a capital loss to nill, not convert cap.loss into capital gain)

if sold for a gain, no adj to cost for CGT