The Law and Capital Allowances
Owning a dentist surgery provides you with a location to practice dentistry on private and NHS patients. This means that usually the entirety of the property is used to help the business run.
Your dentist surgery (or the portion of it you use to conduct your business) may therefore be used to claim Capital Allowances against the cost of the property purchase, build, or renovation and is explored in depth here if you want to learn more.
But what happens if you want to sell your Dentist surgery?
When you sell your dentist surgery, if you have already made a claim for Capital Allowances then the subsequent owner(s) may also make a claim on any of the remaining unclaimed allowances, or additional work they have put into the property.
It is worth noting however that any claim for Capital Allowances for a property purchased after 2014 is subject to new laws that mean rather than the purchase price being used to calculate the Capital Allowances that could be owed, the value of the previous Capital Allowances identified are used. If you’re looking to sell your property therefore, if you haven’t issued a Capital Allowance report on the property you could prevent future owners making a claim for Capital Allowances.
Your Dentist Surgery and Capital Allowances
If you are looking to sell your dentist surgery it is imperative that you speak with your accountant and/or solicitor about the Capital Allowances Act 2001, Section 198. This section of law covers what needs to happen when a property is sold with regards to Capital Allowances and in our experience, after reviewing the law your accountant / solicitor would recommend you speak with Capital Allowance expert to meet your legal obligations.
Why would they make that recommendation?
Whoever purchases your property may wish to make their own Capital Allowance claim. If so, they would need to act at the time of purchase or within two years of such unless you have already identified the Capital Allowances on the property.
If you did not identify the Capital Allowances, and the new owner fails to take action to claim Capital Allowances within that two year period, then they may find that they will be unable to make any claim at all. This could result in them seeking legal action.
Therefore to ensure a future owner of your dentist surgery can claim Capital Allowances, as the seller you must either make a claim for Capital Allowances yourself, or notify HMRC about your entitlement to do so.
Both options require a report produced by a Capital Allowances specialist like Commercial Properties Tax.
Options Available to You
When selling your dentist surgery 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|
|Treat your dentist surgery as though you were not selling it.
Make a claim for Capital Allowances and utilise them for the full amount of tax relief you can before the sale goes through.
Only once the sale goes through will you no longer be able to utilise the tax benefits.
|Rather than losing the tax benefits available to you upon the sale of your property, you crystallise your Capital Allowances.
In the sale of a property, a portion of its value is listed as plant & machinery.
Plant & machinery is part of what Capital Allowances identify. So you can conduct a Capital Allowance report to itemise the exact amount of plant & machinery you hold in the property.
You may then elect to set the value of the plant & machinery anywhere from £2 up to the full Capital Allowances amount you identified.
If you list the plant & machinery at just £2 then the remaining Capital Allowances identified in the report may be claimed by you as tax relief for your current tax year’s profits.
|You don’t have to utilise your Capital Allowances once you identify them.
You could offer them to a purchaser as an incentive to buy your property.
This provides the dentist surgery buyer with instant tax relief upon purchase which provides you with ample room in sale price negotiation, while also making your property more desirable to be would be purchasers.
Many buyers will even offer to fund the Capital Allowance report to obtain the benefit.
It is also within your prerogative to take no action, though we do not recommend such an action. As years pass, should a future owner wish to make a claim for Capital Allowances they may be looking at you should their claim for such fail.
What to do now?
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.