The subject of CPSE 1 s32 can often lead to the glazing over of eyes when brought up as it’s a much talked about subject and yet the truth is that it still really does not seem to have sunken in just how important it is that it’s done correctly and it still gets fudged or even totally ignored. It’s important for all parties as failure to do so can have repercussions down the line that potentially are impossible to deal with.
So if you are involved in the buying or selling of commercial property in any capacity why should you concern yourself?
How does CPSE 1 s32 affect you?
Solicitors – quite apart from a duty of care issue there are also potentially litigation issues if CPSE 1 s32 is not handled properly. It was made clear in a Law Society article last year that it is the responsibility of the acting solicitor (for both vendor and purchaser) to ensure this matter is dealt with correctly. If it is not, it is eminently possible that a disgruntled client who loses out due to the two-year rule governing the s198 election may well seek compensation if they feel that they have materially lost out as a result of their acting solicitor not dealing with this matter as they should have done. At best it’s highly doubtful they would instruct the same solicitor again even if they don’t go down the litigation route. This is all the more frustrating as it can be handled so simply if a capital allowances specialist is involved from the outset.
Accountants – even though the solicitors may be seen to have the responsibility to ensure that this is all handled, a typical client will look to their accountant to advise and direct them correctly in matters to do with taxation. If an accountant is aware that their client is buying or selling a commercial property (or actually even if they have no transaction happening but currently own commercial property) then that client will have a level of expectation that their accountant will advise them effectively. All the accountant has to do is to suggest to the client that they involve a capital allowances specialist and they can be seen to be acting in that client’s best interest.
The Seller – It’s really a matter of control and opportunity. If the seller establishes the level of capital allowances available in the property it becomes a strong selling point and certainly one that can be leveraged in negotiation. It adds value to the property and ensures the seller controls how that added value is used within the sales process.
The Buyer – if the seller has not done this exercise and as is often the client is unaware of it, if the buyer takes control before the contract process it’s perfectly possible for them to get agreement as part of the contract that they can conduct this review and therefore they can benefit from any allowances identified. It also ensures that the seller will cooperate with the supply of information if it forms part of the contract that they should do so. This massively smooths the way for conducting the review after the sale has completed.
So there you are, the solicitors. The accountant, the seller and the buyer all have very strong practical and economic reasons to ensure this review is done as it should be. They need to engage with a capital allowances specialist earlier rather than later in the process.