The Law around Capital Allowances
Your pub is your place of business, operating as a premises for you to supply your customers. A result of this is that the building itself can be used to claim tax relief through Capital Allowances against the cost of buying, building, or renovating the property.
To learn more about Capital Allowances within a pub, click here.
But if you want to sell your pub, what happens then?
When selling your pub any Capital Allowances you have made a claim on cannot be claimed by the subsequent owner(s), but they can make a claim on any Capital Allowances you have not claimed actual tax relief on. So if you have identified £100,000 in Capital Allowances but utilise just £20,000 for tax relief, then the remaining £80,000 may be claim by the new owner.
This is because any property purchased after 2014 is subject to new laws that means rather than the purchase price of the property being used to calculate Capital Allowances, the previously identified Capital Allowances are used.
What this means is that if you are selling your pub, and you haven’t conducted a Capital Allowance report on the property, you could be preventing the future owners of the pub form making a claim.
Selling a Pub and Capital Allowances
When selling your pub it is important that you speak with your solicitor and/or accountant about the Capital Allowances Act 2001, Section 198 to ensure you comply with the rules set down within it.
The reason for this is that whoever purchases your property may wish to make a claim for Capital Allowances. If you haven’t identified the Capital Allowances in the property, and they fail to make the claim within two years of purchasing the property then they may not be able to claim at all.
This could result in them taking legal action.
To ensure that a future owner of your pub can claim Capital Allowances therefore, as the seller it is your duty to identify the Capital Allowances in your property, which you may then claim yourself, or notify HMRC about your right to do so.
When selling a pub we recommend that you consider the following options:
|Make a Claim for Capital Allowances||Make a Claim for Capital Allowances and then Crystallise them||Transfer the Value of Capital Allowances to the Buyer|
|Make a claim for Capital Allowances in your pub and utilise them for the maximum tax relief you can before the sale goes through.
Once the sale completes any remaining Capital Allowances you haven’t yet used will be unable to be utilised by you.
|When selling your pub a portion of its value will be plant & machinery.
If you conduct a Capital Allowance report you can itemise exactly what plant & machinery you hold in the pub.
Using this report you can then set the value of plant & machinery in the pub when you sell as anywhere from £2 up to the full amount you identified with the report.
If you list the plant & machinery at just £2 then the remaining Capital Allowances you identified in the report (minus the £2) may be claimed by you as tax relief for your current year’s profits.
|Instead of using your Capital Allowances for tax relief, you use them as an incentive for the buyer.
You can make them an add-on to the buyer of your pub so that they can claim instant tax relief with the purchase of your property.
This provides you with significant negotiation room, and makes your property more desirable.
Many buyers may even offer to fund Capital Allowance report to obtain the benefit.
Should you wish, you may also take no action. Commercial Properties Tax do not recommend this however as it runs the risk of subsequent owners looking to you should they wish to make a Capital Allowances claim in the future and find out they can’t.
Next Steps if You’re Selling a Pub?
Get in contact with Commercial Properties Tax for a no obligation Free Audit / Review and see how we can help you meet take the best action for your circumstances.