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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 todeal with the separate assets. You do so on the basis of a just and reasonableapportionment.

For example, the sale price of a shop may include something for the premises andgoodwill, which have not qualified for capital allowances, and something for fixtures andfittings, which have. Where assets that have qualified for capital allowances are soldtogether with assets that have not make a just apportionment of the sale price toestablish how much of the sale price relates to the assets that have qualified for capitalallowances.

The seller is likely to apportion as small an amount as possible to assets that havequalified 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 qualifyfor 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 thebuyer/seller’s district to make sure that the buyer/seller has used the same apportionmentin their capital allowance computations as your taxpayer. You should not accept yourtaxpayer’s computations if different figures have been used.

Example Peter sells a pub together with its fixtures and fittings toDennis 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 computationsshould be accepted until they both use the same apportionment.

You should ignore any apportionment figures shown in the sale documents if those figuresseem unreasonable. You must remember that if the total sales figure has been negotiated atarm’s length you cannot change that total sales figure. If you think that theapportionment given by the taxpayer undervalues the assets that have qualified for capitalallowances you can only challenge that apportionment if you can also show that somethingelse has been overvalued.

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