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HMRC internal manual

Capital Allowances Manual

General: Combined sales: Property sold with other property

CAA01/S562 (1) - (3)

You may have a case where:

  • assets that have qualified for capital allowances are sold together with other assets that have not; or
  • several items of plant and machinery are sold together but have expenditure in different pools.

If so, you may need to break down one sale price that covers everything in order to deal with the separate assets. You do so on the basis of a just and reasonable apportionment.

For example, the sale price of a shop may include something for the premises and goodwill, which have not qualified for capital allowances, and something for fixtures and fittings, which have. Where assets that have qualified for capital allowances are sold together with assets that have not make a just apportionment of the sale price to establish how much of the sale price relates to the assets that have qualified for capital allowances.

The seller is likely to apportion as small an amount as possible to assets that have qualified for capital allowances in order to minimise the balancing charge. The buyer, however, will want to apportion as much of the price as possible to assets that qualify for capital allowances. The buyer and the seller have to use the same apportionment.

If you find out that an apportionment has been made you should check with the buyer/seller’s district to make sure that the buyer/seller has used the same apportionment in their capital allowance computations as your taxpayer. You should not accept your taxpayer’s computations if different figures have been used.

Example Peter sells a pub together with its fixtures and fittings to Dennis for £300,000. Peter has claimed capital allowances on the fixtures and fittings. Peter’s apportionment is pub £280,000; fixtures £20,000. Dennis’s apportionment is pub £230,000; fixtures £70,000. Neither Peter’s nor Dennis’s capital allowance computations should be accepted until they both use the same apportionment.

You should ignore any apportionment figures shown in the sale documents if those figures seem unreasonable. You must remember that if the total sales figure has been negotiated at arm’s length you cannot change that total sales figure. If you think that the apportionment given by the taxpayer undervalues the assets that have qualified for capital allowances you can only challenge that apportionment if you can also show that something else has been overvalued.

If one of the assets included in the combined sale is land you should follow the guidance at CA12300.