CA26476 - PMA: Fixtures: Changes in ownership: Pooling requirement

CAA01/S187A (4) and FA12/SCH10/PARA13

Transfer after April 2014

If the transfer of interest from a past owner CA26474 takes place on or after 1 April 2014 (corporation tax) or 6 April 2014 (income tax) the current owner will only be able to claim PMA in respect of a fixture if the pooling requirement is met. This requirement is met if the past owner has allocated his or her qualifying expenditure relating to the fixture to a pool CA23210. Pooling includes making a claim for FYA or Annual Investment Allowance in respect of this expenditure. It is not necessary for the past owner to claim writing down allowances. There is no fixed time limit but the past owner must pool the expenditure in a chargeable period where they are treated as owning the fixture.

PMA will not be available for any future owners on any part of the past owner’s qualifying expenditure on fixtures that has not been pooled.

Transfer before April 2014

Transitional provisions in FA12/SCH10/PARA13 mean that this requirement does not need to be met if the period for which the plant or machinery is treated as having been owned by the past owner as a result of them having incurred expenditure during his period of ownership ends before 1 April 2014 (corporation tax) or 6 April 2014 (income tax).

This means that where the current owner incurs expenditure on acquiring fixtures from a past owner before 1 (or 6) April 2014 and the past owner has not claimed allowances or pooled their expenditure in respect of a qualifying fixture, the current owner may claim PMA on the part of the price they paid which is attributable to that fixture. This is subject to the restrictions imposed by CAA01/S185 in respect of any previous owner who may have claimed allowances in respect of the fixture (CA26400).

As is always the case where S187A applies, the current owner will need to substantiate and quantify his or her entitlement to allowances in these circumstances (CA26484).

Example

Jill has owned the freehold interest in an office since 2004 and sells it to Jack for £1 million in 2013. The office contains some fixed plant or machinery for which Jill has claimed capital allowances in the usual way. It also contains wiring, control panels and other electrical equipment (which Jill installed specifically to supply plant and machinery) and general lighting, all installed before 2008, for which Jill has not made any claim to capital allowances, nor is the expenditure on the lighting or electrical equipment pooled. Jill could have claimed capital allowances on the cost of the wiring and equipment installed specifically to supply plant and machinery, but not on the cost of the general lighting as it was installed before the integral fixtures rules were enacted in 2008 (CA22300).

Jill and Jack make a section 198 election to the effect that £50,000 of the purchase price relates to the fixed plant or machinery on which Jill has claimed capital allowances.

Jack has evidence from a quantity surveyor that £8,000 of the purchase price relates to the electrical equipment installed specifically to supply plant and machinery in the warehouse and £10,000 relates to the general lighting. Jack will be able to claim capital allowances on that £18,000 in addition to on the £50,000 covered by the S198 election.

If Jill sold the warehouse in 2015 then, before the new owner could claim capital allowances, the pooling requirement would need to be met in respect of her expenditure on the electrical equipment that she was entitled to claim plant and machinery allowances on but not in respect of her expenditure on the general lighting because she was not entitled to claim plant and machinery allowances on that expenditure.