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Capital allowances on SDLT, LBTT or LTT

Updated: Jul 5, 2020

If you buy a property in the UK you will normally be charged a transaction tax dependent on the location of the property involved:

  1. Stamp Duty Land Tax (SDLT), in England and Northern Ireland

  2. Land Building Transaction Tax (LBTT) in Scotland

  3. Land Transaction Tax (LTT) in Wales

To what extent you will be entitled to tax relief on the cost of (1) to (3) above will be dependant on the nature of the asset involved and its capital allowances claim history.

If you are buying a used property from a UK taxpayer it is very likely that your claim will be limited to the election value or alternative apportionment calculation arising from the previous claim. This ignores (1) to (3) because it is designed to be linked to the Seller’s disposal value (and if you cannot determine or agree this you will likely be restricted to nil).

However, if you are entitled to make a new claim (e.g. because you bought from a developer or non-tax payer sole owner) then a proportion of the applicable transaction tax should be capable of qualifying. This is because such costs relate directly to the acquisition of the building (upon which the new claim is based) and any fixed plant or machinery installed.

A capital allowances valuation will be needed to identify the qualifying components on a just and reasonable apportionment basis – a fact reinforced in the relatively recent case of Bowerswood House Retirement Home Limited [2015] UKFTT 0094 (TC). As you would expect, this can vary significantly, not just by the levels of specification (more sophisticated services and fittings normally results in higher base claims) but also by location (higher land values can reduce base claim amounts).

As an example, if we assume a qualifying capital allowances portion of 30% (e.g. for the fixed plant and machinery in a high specification office acquisition) then the claim analysis and saving (assuming a corporation tax rate of 19%) for options (1) to (3) above would look something like:

When VAT is charged, the transaction tax (SDLT, LBTT or LTT) is calculated inclusive. The interaction of capital allowances on VAT is variable.

If you purchase from a connected person or the property forms part of a sale or lease and leaseback arrangement it is likely that a claim for (1) to (3) will be restricted.

At Furasta Consulting we have significant experience of capital allowances valuations for a wide variety of property types (including negotiation with HM Revenue & Customs and the Valuation Office Agency).

If you would like more details on any aspects of the above, please do not hesitate to contact us.

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