New Commercial Property Standard Enquiries recognise the role of the capital allowances advisor
The Commercial Property Standard Enquiries (CPSE) are used by property solicitors at pre-contract stage to raise the comprehensive enquiries required for each property transaction. The CPSE are prepared by members of the London Property Support Lawyers Group and endorsed by the British Property Federation.
In just over a year there have been two new versions of CPSE; version 3.2 (January 2013) and version 3.3 (February 2014). In each, the capital allowances section has been extensively updated and reorganised to reflect the recent changes to the capital allowances fixtures legislation, specifically the introduction of the fixed value requirement in April 2012 and mandatory pooling in April 2014.
Capital allowances are now covered by enquiry Nr 32 of CPSE 3.3 with the emphasis being plant and machinery fixtures and the provision of information relating to previous claims by vendors. It is important to note however the following points:
- The replies to enquiries do not identify the fixtures on which capital allowances have not been claimed by the seller or the previous owner. The enquiries only ask whether the seller would be willing to pool this expenditure if requested by the purchaser. Many sellers however will not realise there are qualifying items on which they have not made a claim. The potential capital allowances on these unclaimed items can be significant and unless a full due diligence exercise is carried out by a specialist capital allowances advisor highlighting these potential allowances during the transaction stage and adding specific clauses to the contract ensuring the vendor pools the allowances, they could be lost.
- Whilst the enquiries request that the vendor provide detailed information on previous fixtures claims, they only briefly mention other forms of capital allowances such as industrial building allowances. These other forms are complex and can significantly restrict any claim for fixtures by the purchaser and again specialist capital allowances advice should be sought.
- Capital allowances is a complex subject and the property solicitor is not in the best position to understand the implication of the replies, what their impact will be on any future claim by the purchaser and whether any further information is required.
- The final enquiry 32.10 requests that the vendor provide the name and contact details of their capital allowances advisor. This is the first time that the CPSE has ever recognised the need for a capital allowances advisor.
Whilst CPSE are now geared towards the new rules, it is clear that the enquiries are just the starting point. It is essential that the client or the clients’ solicitors obtain input from a specialist capital allowances advisor for the successful negotiation of the capital allowances, obtaining the most tax efficient outcome for the client.
Posted May 2014