When a commercial property is bought or sold, the conveyancer’s role is often thought of as being primarily about the legal transfer of the property.

But there is another important consideration that can easily be overlooked: capital allowances.

For commercial property owners, capital allowances can represent a significant tax-saving opportunity. However, the ability to claim them can depend on what happened during the property transaction and the legal documentation surrounding that transaction.

This is why involving the right professionals, at the right stage, is so important.

What are capital allowances?

Capital allowances are a form of tax relief available on qualifying expenditure incurred on certain fixtures and plant and machinery within a commercial property.

These can include items such as:

• Electrical systems
• Heating and air-conditioning systems
• Plumbing installations
• Lighting systems
• Fire and security systems
• Lifts and escalators
• Certain integral features
• Other qualifying plant and machinery

For a property owner, identifying these assets can potentially unlock valuable tax relief.

However, capital allowances are not simply a matter of carrying out a survey after purchasing a building and making a claim.

The transaction itself matters.

Why conveyancers have an important role

The rules surrounding capital allowances mean that the treatment of qualifying fixtures needs to be considered when a commercial property changes hands.

This is where conveyancers can play a crucial role.

During a commercial property acquisition, the conveyancer is responsible for negotiating and documenting important aspects of the transaction. If capital allowances are not considered, an opportunity can potentially be missed or the buyer’s future ability to claim may be affected.

A specialist capital allowances adviser can identify the qualifying expenditure, but they need the transaction documentation and, importantly, they need to be involved at the appropriate stage.

This means that conveyancers are often the first line of defence in ensuring the issue is not overlooked.

The problem with leaving it until after completion

One of the most common mistakes is assuming that capital allowances can simply be dealt with once the purchase has completed.

Unfortunately, it is not always that straightforward.

The legislation contains specific requirements concerning the disposal and acquisition of fixtures, including rules relating to the pooling and transfer of qualifying expenditure.

For certain transactions, the position needs to be established and documented as part of the property transaction.

By the time a buyer contacts a capital allowances specialist months or years after completion, important information may be difficult to obtain.

The previous owner may have claimed allowances.

Historic expenditure records may be unavailable.

The seller may have moved on.

And crucial transaction documentation may already have been finalised.

Early consideration is therefore far more effective than trying to reconstruct the position afterwards.

Conveyancers don’t need to be capital allowances experts

This doesn’t mean that conveyancers need to become capital allowances specialists.

Instead, they need to recognise when the issue should be raised and when specialist advice is appropriate.

A simple question during the transaction can make a significant difference:

“Have capital allowances been considered for this property?”

If the answer is no, this can be the trigger for bringing a specialist adviser into the transaction.

The conveyancer can then work alongside the buyer, seller and capital allowances specialist to ensure the relevant legal and tax considerations are addressed.

A missed opportunity can be expensive

Commercial property transactions can involve substantial sums of money.

Yet capital allowances are sometimes treated as an afterthought, particularly when attention is focused on the purchase price, financing, SDLT, searches and the legal transfer of the property.

This can be a mistake.

A property that appears to be worth £1 million, for example, may contain a significant amount of qualifying expenditure embedded within its fixtures and systems.

The resulting tax relief can potentially be substantial.

The important point is that the value isn’t necessarily visible from the property price alone.

It may be sitting within the building’s electrical systems, heating, plumbing, lighting and other qualifying assets.

The benefit of involving a specialist early

The best time to consider capital allowances is before or during the property transaction, rather than treating it as something to investigate retrospectively.

A capital allowances specialist can:

1. Review the property and transaction.
2. Identify potentially qualifying expenditure.
3. Review available historic information.
4. Liaise with the conveyancer where necessary.
5. Consider the implications of the seller’s position.
6. Help ensure the appropriate documentation and elections are considered.
7. Quantify the potential tax relief.

This collaborative approach can make the process considerably smoother.

A three-way relationship that benefits the client

For commercial property transactions, there can be real value in having three professionals working together:

The conveyancer
Protects the client’s legal position and ensures the transaction is properly documented.

The accountant/tax adviser
Considers the wider tax position and how available reliefs fit into the client’s circumstances.

The capital allowances specialist
Identifies qualifying expenditure and advises on the available capital allowances.

Each professional has a different role.

And when they communicate early, the client is in a much stronger position.

Conveyancers: don’t let capital allowances become an afterthought

For conveyancers acting on commercial property transactions, capital allowances may not be the main focus of the transaction but they can be an important part of protecting the client’s financial interests.

A quick conversation at the outset can prevent a much more complicated investigation later.

For buyers, the message is equally important:

Don’t wait until after you’ve bought the property to ask whether capital allowances are available.

Make it part of the acquisition process from the beginning.

The takeaway

Capital allowances can represent a valuable tax-saving opportunity for commercial property owners, but timing matters.

Conveyancers are uniquely positioned to flag the issue during the transaction and ensure that specialist advice is obtained before important decisions are finalised.

The best capital allowances claim often starts before the property purchase has even completed.

If you are acquiring or disposing of a commercial property, speak to a capital allowances specialist alongside your conveyancer and tax adviser to make sure the opportunity is properly considered.

Get in touch with our team to have a discussion: