HMRC internal manual

Capital Allowances Manual

General: Combined sales: Property sold with other property

You should check the other guidance available on GOV.UK from HMRC as Brexit updates to those pages are being prioritised before manuals.

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 that the other party to the sale (the buyer/seller) has used the same apportionment in its capital allowance computations. You should not accept your taxpayer’s computations if different figures have been used.

For plant and machinery fixtures, the value can be fixed by a joint election under CAA01/S198 or S199. Indeed, due to changes made in 2012 and 2014 it is usually necessary for the parties to make such an election to ensure that the purchaser is entitled to claim capital allowances. For further information, see CA26000.

Example

Peter sells a pub together with plant and machinery fixtures and chattels to Dennis for £1,000,000. Peter has claimed capital allowances on the plant and machinery. They have elected under CAA01/S198 for the fixtures to be valued at £1. Peter’s apportionment is pub £974,999; fixtures £1; chattels £25,000. Dennis’s apportionment is pub £949,999; fixtures £1; chattels £50,000. Neither Peter’s nor Dennis’s capital allowance computations in respect of the chattels 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.