Commercial buildings - Time is running out for certain tax claims

July 2007

From April next year fixtures and fittings included in the sale or purchase of a commercial building will be treated differently for capital allowance purposes. At present you can claim a tax writing down allowance of 25% per annum. (This rate is applied to the tax written down value at the beginning of each year.)

From April 2008 these types of fixtures and fittings are to be re-classified as long-life assets and the annual tax allowance will be reduced to 10%.

This does point up an interesting tax planning opportunity for purchasers of commercial property who did not sign a particular tax election when the property was bought.

The tax election referred to here is a Section 198 claim. This election effectively binds both the seller and purchaser of a commercial property to an agreed valuation for fixtures and fittings included in the sale. This agreement is irrevocable - cannot be subsequently changed.

If you did sign such an election what we are about to suggest will not apply!

If you did not sign a S198 election you are free to have the original split of the purchase price between the cost of the building and it's fixtures and fittings re-examined for tax purposes. If you can provide the Revenue with sufficient evidence (professional valuations etc) you may be able to increase the amount attributed to fixtures and fittings. This can be achieved even if a number of years has passed since you bought the property.

The benefit is an increase in your claim for capital allowances from the date of purchase of the property until 5 April 2008. (If you still own the property at that date.)

Time is running out so please give us a call if you would like us to examine past claims on commercial property that you own.