PUB PURCHASES - MAKING THE MOST OF CAPITAL ALLOWANCES
 Buying pub properties
Many pubs are currently changing hands and sold as a result of the economic situation, or where pub companies are reviewing their portfolios.
What can often be overlooked by a potential purchaser is the value of capital allowances within an acquisition and the ability to negotiate for these.
Values of allowances
Capital allowable items include water installations, heating, chilling and ventilation systems and air-conditioning in larger units, electrical installations, bar fittings, fixed equipment and ambient fittings. The loose equipment and furniture which often comes with the purchase will also be allowable.
The potential range of allowable items can represent up to 25% of the purchase price in some circumstances.
This value can then be set against your Corporation or Income Tax at varying rates annually, dependent on whether it is categorises as integral or main pool plant. In all, you should be able to save the value established multiplied by your rate of tax.
The seller’s position
Sellers can range from pub companies, who are likely to know about allowances and have claimed them, to individuals who will most often be less aware.
Knowledgeable sellers will try and pass on little or no value on the sale by use of contract clauses and elections. In this market where buyers have more power it is possible, before the sale is exchanged, to negotiate for the full value of allowances.
Where a seller is unaware or has made no claim himself for any reason any allowances available will pass over with the sale, but some safeguards can be useful.
The valuation mechanism
Where no claim has been made, valuation is based on an apportionment of the price paid for the property. This involves assessing a rebuild cost for the building, An appropriate land value and detailed costs of the plant and machinery in the pub.
This is not as complex as it first appears and specialists like ourselves have developed cost effective systems for valuing and agreeing these allowances with HMRC.
Key contact
Andy White Davis Langdon LLP
Mid City Place, 71 High Holborn, London WC1V 6QS
Phone: 020 7061 7000
Fax: 020 7061 7061
Email:
andy.white@davislangdon.com |
