Mandatory Pooling

After April 2014, pooling of allowances prior to sale becomes mandatory. This works in conjunction with the transfer value requirement. This means that anything not quantified, claimed and then transferred in a 100% compliant manner, will be lost forever.

This could result in a significant proportion of commercial buildings falling outside of Capital Allowances and a substantial reduction in the latent claim out there.
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What is Mandatory Pooling?

All Capital Allowances on qualifying items of fixed plant must be pooled by the seller at the point of sale. A fixed amount must also be agreed with the buyer to determine the value of that fixed plant which is to be disposed.

The fixed amount is agreed via a Section 198 Election CAA 2001, with the value not exceeding the capital expenditure incurred by the seller on the fixed plant or the sale price.

What does this mean for commercial building owners?

Unfortunately, the buyer of a second-hand commercial property can no longer make a claim for fixed plant and must rely on the seller to pool the available Capital Allowances and dispose of them in part or in full when the property is transferred.

Many commercial building owners are simply unaware  of the Capital Allowances available to them and the significant cash benefits their business can enjoy as a result.  Because of this, material sums of Capital Allowances are being lost forever.

HMRC fixed a 2-year transfer window from the date a commercial building is sold until an election is put into place. Failure agree a transfer value in this time will unfortunately result in the Capital Allowances being lost forever.

Will Capital Allowances on fixed plant eventually disappear overtime?


No, there will always be Capital Allowances available. Any new commercial build, property extension, conversion or refurbishment will have Capital Allowances available that fall outside of the pooling requirements, as well as any property acquired from a seller who did not have a qualifying activity (e.g. a property developer) or is a non-taxpaying entity (e.g. a charity or pension fund).

There are also installations, known as integral features (e.g. electrics, lighting, and cold water), that currently qualify for Capital Allowances but were deemed “non-qualifying” before April 2008. So, if the seller acquired the property prior to this date, they are not able to claim on these integral features, and therefore, the pooling requirement does not apply. As a result, the buyer is then able to claim on these integral features based upon their own capital expenditure, which may still generate a worthwhile claim.

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Main Rate Pool

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