Claiming capital allowances on commercial buildings: the rules

Capital allowances are a very valuable relief, but there are important procedural matters that have to be dealt with if the allowances are to be claimed.

In 2012, HMRC introduced two measures affecting claims to capital allowances on commercial property.

The first of the measures, which applied from 2012, is the “fixed value requirement.” This requires that if a purchaser of a commercial building wants to claim capital allowances on any plant and machinery forming part of the building, he must enter into a joint election with the vendor to agree an apportionment of the price. The election must be made within two years of the purchase. The parties can agree any value up to the original cost of the fixtures; typically the purchaser will want to agree a value as high as possible so as to maximise the availability of his capital allowances on the building, while the vendor will normally prefer a lower figure so as to avoid a taxable clawback of allowances previously claimed (“balancing charge”). Where the purchaser and vendor are unable to agree a value, either party can apply to the Tax Tribunal to fix an apportionment of the price; but this, too, must be done within two years of the purchase.

The second measure is the “pooling requirement”. This applied for sales made from April 2014 and normally will deny a purchaser any capital allowances at all in respect of fixtures in the building unless the vendor has previously made a claim for allowances in respect of those fixtures. If for any reason the vendor has failed to claim capital allowances, there is nothing the purchaser can do but be made aware that no allowances can ever be claimed on those assets within the property, whether by the purchaser or by any subsequent purchaser. This is of course very likely to impact on the value of the property. However, the rules do not operate to deny allowances to the purchaser where the reason the vendor has not claimed capital allowances is because there is no entitlement to them – for example, where the vendor is a charity or a pension fund. Best practice, even for an owner unable to claim allowances, would be to maintain details of all expenditure on which capital allowances could be claimed by a qualifying future purchaser of the building.

Although the new rules prevent claiming capital allowances where no election has been made, and where the vendor had not claimed allowances, for properties acquired before the new rules came into force, allowances can be claimed without meeting one or both of these requirements.

So if you bought a property in say 2005, which you still own, and where previous owners had not claimed allowances, you can still make a claim for allowances that could have been claimed on your acquisition.  However, if you bought the property in 2015, you would need to meet the two requirements above in order to claim.

“What do I need to do?”

  • If you have bought commercial property since April 2012 and you have not yet made a joint capital allowances election with the vendor, you should either do so before April or, in default of agreement, apply to the Tax Tribunal for a ruling.
  • If you are an owner of commercial property, be aware that a failure to claim all allowances will not only affect your own current tax bill but will affect your ability to pass allowances on to a purchaser and so is likely to impact on the valuation of the property on any future sale.
  • As a general rule, be aware that a detailed capital allowance history needs to be collated and form part of the property legal documents ‘bundle’ each time there is a transaction for that property and that a formal “value-fixing” election should be negotiated as part of the purchase process.
  • Purchasers of property should speak to their professional advisers to ensure firstly, that a complete capital allowance history is requested as part of the ‘pre-contractual’ enquiries; and secondly, that where appropriate the purchase contract requires the vendor to claim capital allowances on relevant fixtures if they have not done so already.
  • And remember for property you purchased before the new rules came into effect, you may still be able to make a claim without meeting the new requirements.

For more on these changes please get in touch with your usual BKL contact partner or use our enquiry form.



Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.


Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.


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