Capital Allowances on fixtures within buildings and the overlooked Integral Features Uplift

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If you’ve bought a commercial building from someone who owned it in 2008 then you may be missing out on some tax reliefs on the Integral Features.

Capital Allowances for buildings can be a confusing area of tax.

When someone buys a building there are often parts of the building that are ‘qualifying fixtures’ which are eligible for capital allowances. This encompasses the parts of the building that perform some kind of function. There are various capital allowances specialist companies that offer to come in to survey the building and ascertain what value should be applied to the functional parts. Typically these firms charge a fee based on how much they find. Functional parts of a building can be fairly wide ranging including items from door hinges to heating systems etc…

Since 2014 the purchaser can only claim capital allowances if the vendor had already assigned a value to these fixtures and created a capital allowances pool for those fixtures. The vendor’s pool can then be transferred to the buyer for the buyer to continue the capital allowances claim. This is known as a “section 198 election”. This is done at the time of sale.

The vendor & the buyer agree between themselves what value should be placed on the pool of fixtures. Typically the vendor wants a low value; to prevent any balancing charge arising on their disposal, and typically the purchaser wants a high value; to enable them to claim capital allowances on a bigger part of their acquisition cost. This is a point of negotiation between the two parties. Once the s198 election has been entered into it cannot be amended. The purchaser cannot subsequently appoint a capital allowances specialist to assign a different value to the fixtures. This means that if the vendor has not done the exercise of assigning a value to the fixtures, then the buyer is forever precluded from doing so.

As a planning tip, if the purchaser considers that there could be a claim on the fixtures then the vendor would need to address this prior to the sale taking place. The vendor themselves would also need to consider their own acquisition of it and whether they are entitled to start the s198 claim.

First entitlement:

The claim for capital allowances on fixtures must be done by the person who is first entitled to do so. The claim can then only pass to a subsequent owner under the section 198 election.

If you bought the building from someone else then you are not the first person entitled to claim, and you are stuck with your inherited s198 pool.

However, there may be cases where the vendor was an entity who was not the first entity entitled to claim, for example:

  • The vendor may not have been subject to tax and thus had no entitlement to capital allowances. This could apply on purchases from charities or pension funds.
  • The vendor may be the initial developer. The developer most probably would have held the property as stock and could not have claimed capital allowances.

In both of those scenarios the purchaser may be able to commence a fixtures claim, despite there not being a s198 election at the point of their acquisition.

Interaction of this with Integral Features and the overlooked “Integral Features Uplift” claim:

Back in April 2008 HMRC introduced a new category of items eligible for capital allowances, called “Integral Features”. This category includes


electrical system


cold water system


space or water heating system  (including any floor or ceiling in such a system)


powered system of ventilation, air cooling, air purification (including any floor or ceiling in such a system)


lift, escalator or moving walkways


external solar shading

Most of these items were not eligible for any capital allowance prior to April 2008. To prevent a flurry of capital allowances claims for items already in existence HMRC put in provision to prevent capital allowances from being claimed until such as time as items were transferred to a new owner. Thus the first purchaser of a building after April 2008 would have become the first person entitled to claim the capital allowances for the Integral Features in existence in April 2008.

This means that if you have bought/ are buying a property, where the vendor owned it at April 2008 then you may be entitled to an “Integral Features Uplift”. This is in addition to whatever value of fixtures has been placed in the s198 pool. Such a claim can identify typically about 15% of the purchase price as being allocated the Integral Features, and upon which you can claim a writing down allowance at 6%. Such a claim can give you a tax deduction that would otherwise go unclaimed.

This is also a consideration if you are the second post 2008 purchaser. If you are thinking of buying a building from someone else who is the first purchaser since 2008 (i.e. you would be the second purchaser) then you would need to get the first purchaser (your vendor) to undertake the Integral Features Uplift in order for you to continue the claim. If the first person entitled to does not do the claim, then all subsequent owners are precluded from doing so. The buyer may even decide to undertake this exercise at the vendor’s expense and possible to include a clause in the sale & purchase agreement to undertake the actual valuation exercise after the sale has completed.

If you would like to discuss this potential claim further please get in touch with Ellis & Co. on 01244 343504.