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CPSE.1 Section 32 (Version 3.5): Here are the 10 questions that are part of
Section 32. These must now be filled in correctly.
Property Capital Allowances
NOTE: In this enquiry 32 “plant and machinery fixtures” means plant and machinery fixtures at the property.
1: Do you hold the Property on capital account as an investor/ owner occupier, or on revenue account as a developer/ property trader as part of your trading stock? Please specify which.
2: Have you claimed Capital Allowances on plant and machinery fixtures or allocated any expenditure on such fixtures to a Capital Allowances pool? If so, please answer the supplementary questions in enquiry 32.9 in respect of that expenditure.
3: If you have not pooled any expenditure on plant or machinery fixtures:
(a) will you do so if the buyer asks you?
(b) if so, by when?
(c) if not, why not?
4: If you bought the Property and cannot pool any expenditure on plant and machinery fixtures.
a) please provide the name and contact details of everyone who has owned the Property since April 2014
(b) please provide evidence that the most recent previous owner who was entitled to claim Capital Allowances pooled any expenditure on plant and machinery fixtures? Please answer the supplementary questions in enquiry 32.9 in respect of that previous owner’s expenditure.
5: Please provide details of any plant and machinery fixtures which were paid for by a tenant, including any contributions made by you towards their cost.
6: Please provide details of any plant and machinery fixtures which are leased to you by an equipment lessor.
7: If the transaction is the grant of a new lease at a premium and you are entitled to do so and the Buyer asks you to, will you enter into a Capital Allowances Act 2001 section 183 election for the Buyer to be treated as the owner of the plant and machinery fixtures for Capital Allowance purposes?
8: Please provide details of any expenditure on plant and machinery that you have treated as long-life assets, or any expenditure upon which you have claimed another type of Capital Allowances (for example, industrial buildings allowances, research and development allowances, business premises renovation allowances and so on).
9: For each plant and machinery fixture for which a claim has been made or expenditure has been pooled, please
(a) provide a description of that fixture;
(b) state when that fixture was acquired;
(c) state whether that fixture was installed by you, or already installed by a previous owner (please specify which);
(d) state the amount of expenditure pooled in respect of that fixture; and
(e) (where enquiry 32.2 applies) confirm that you will enter into a Capital Allowances Act 2001 section 198 election in that amount (or other appropriate amount, to be agreed) if asked to do so by the Buyer. OR
(f) (Where enquiry 32.4 applies) confirm whether the most recent previous owner who was entitled to claim allowances entered into a Capital Allowances Act 2001 section 198 election and, if so, in what amount.
10: Please provide the name and contact details of your Capital Allowances advisor. Please confirm that we may contact him/her in order to obtain information about the matters dealt with in this enquiry 32.
Historically, when solicitors filled in the CPSE form, the section on Capital Allowances usually had the questions answered “N/A”, “See the Accountant” or simply left blank (as there were never any real consequences and neither party took any financial interest in the answer). Frequently, buyers’ and sellers’ Solicitors would agree to sell or buy the assets for £1 (one pound) as that was a simple way to conclude the matter and both parties agreed. The clients always accepted the outcome, as it seemed a logical thing to do. If the Solicitors were in agreement why would the client object? Was there any risk involved to the Solicitors, the Accountants or the clients? There has always been some risk for not exercising the correct “duty of care” but prior to the new Capital Allowance law the risk was relatively small and the financial consequences not understood.
Some Solicitors who felt they may be exposed to any risk always put in the engagement letter “We are not responsible for tax advice” feeling very confident that this would protect them from any future claims about loss of tax benefits.
Others have pointed out to the clients that they should consult their Accountant and a Capital Allowance Tax advisor, believing that this will prevent there being any chance of a negligence claim, as they have given clear guidelines to their client. Under the requirements of the new law do these disclaimers protect the Solicitor against charges of “lacking a duty of care”? Are they sufficient?
The answer now is emphatically NO. Unless the Capital Allowances have been identified in the correct manner as part of the sales/ purchase contract then both parties could lose substantial tax savings. Who will the clients then hold responsible?
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