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Fixtures Allowances in Commercial Property Transactions: Pooling and Fixed Value Requirements

New rules concerning capital allowances on the disposal of fixtures (first announced in 2011) are now in full force. The changes, which are procedural and impose additional formalities, are: Mandatory pooling (which came into effect in April 2014); and The fixed value requirement ("FVR") (which came into effect in April 2012).

Nevertheless, the old rules continue to apply.

The basic aim is to limit plant and machinery allowances on fixtures ("PMAs") to the original cost incurred and to prevent double claims on expenditure on the same fixture. In particular, the problems with the old system were that: The parties did not necessarily agree a single disposal/acquisition value; and Late pooling by the buyer made it difficult to track information on a previous owner's claims.

Where the requirements apply, for PMA purposes a buyer of second-hand fixtures will be treated as having qualifying expenditure of nil (and will therefore be unable to claim PMAs on the relevant fixtures in future) unless both requirements (if applicable) are satisfied.

The rules operate by reference to a "past owner" which is usually – but not necessarily – the seller. Simply, the "past owner" is the most recent person (before the buyer) who has been entitled to claim PMAs (e.g. the previous seller).

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