Capital allowances and sellers who won’t cooperate
10th July 2026
Posted in Articles by Andrew Marr
The Issue
Capital allowances on property transactions remain one of the most valuable forms of tax relief available to buyers. However, entitlement to claim them is increasingly being blocked. This blockage is not caused by legislation, but by seller non‑cooperation. When sellers refuse to engage in the mandatory election/pooling process, buyers can lose access to allowances that would otherwise significantly reduce future tax liabilities.
When does the problem arise?
The issue stems from changes to the capital allowances rules for fixtures between 2012 and 2014. From April 2012 it became mandatory, where a seller had pooled allowances, for the buyer and seller of a property to enter into an election (under s.198 of the Capital Allowances Act 2001) to fix the disposal value of any fixtures within two years of the sale. From April 2014 it then became mandatory, if the seller was entitled to claim capital allowances, to pool the expenditure prior to the transfer.
Problems typically arise when:
- The seller has not pooled historic expenditure on fixtures.
- The seller refuses to enter into a s.198 election, often because they never claimed allowances themselves or do not have awareness of legislation.
- The sale contract is silent on capital allowances, which in most cases leaves the buyer with no statutory route to entitlement.
- The seller’s advisers take a defensive stance, fearing that cooperation may trigger historic tax enquiries.
In these cases, even where substantial qualifying fixtures exist within the property, the buyer (and any future owner for that matter) may legally be prevented from claiming anything.
Why sellers are refusing
Non‑cooperation is common, mainly for three reasons:
- Sellers assume that “if we didn’t claim them, you shouldn’t either”.
- Some advisers incorrectly believe that signing a s.198 election creates tax exposure for the seller.
- Capital allowances are increasingly seen as a negotiation lever rather than a routine part of due diligence.
The result is a significant volume of transactions where allowances exist but cannot be accessed.
Example
A company acquires a commercial building for £3 million. A review identifies fixtures valued in the region of £400,000 that would normally qualify for capital allowances. However, the seller never pooled their historic expenditure and refuses to sign a s.198 election.
As the pooling requirement has not been met, the buyer’s entitlement is effectively blocked. Despite the presence of qualifying unclaimed fixtures, the buyer cannot claim any allowances, resulting in the tax relief being permanently lost (if not addressed within two years of completion).
Forbes Dawson view
Since 2014, this issue has been common in commercial property transactions. Buyers often assume allowances transfer automatically, but the legislation requires active cooperation from the seller. Without it, entitlement can be lost entirely.
Our view is that the whole issue of capital allowances should be addressed at the offer acceptance stage and when responses to the commercial property standard enquiry form (‘CPSE.1’) are received, and contracts are at draft, and not left to completion. Early engagement prevents sellers from shutting down the discussion and ensures that the buyer’s entitlement is protected. In a market where tax efficiency is increasingly important, capital allowances are not just a technical point, they are a significant tax benefit that need to be managed proactively. We can advise on this side of things if we are involved at an early enough stage.
