Broadly this legislation limits the allowances given overall on
a fixture to original cost. When a person (
the current owner) is treated as owning a fixture
that another person (
the past owner) has previously been treated as
owning the expenditure of the current owner that qualifies for PMA
is restricted to the past owner's disposal value. This does not
apply where the past owner was treated as the owner by the
contributions legislation in CAA01/S537
CA14500.
Note that the past owner is not necessarily the person from
whom the current owner acquired the fixture. It is the last person
that was treated as the owner of the fixture by the fixtures
legislation. This means that if a person acquires a fixture from a
person whose expenditure on the fixture was revenue expenditure,
for example, that person cannot be the past owner.
Example Cassandra Plc constructs an office block
for its own use and claims PMA on the fixtures in the building.
Three years later it sells the office block to Spencer Moore Ltd, a
firm of property dealers. When Cassandra Plc sells the office block
it has to bring a disposal value to account because it has treated
its expenditure on the fixtures as qualifying expenditure. Spencer
Moore Ltd’s expenditure on the office block is revenue
expenditure and so it cannot claim PMA on the fixtures. Spencer
Moore Ltd then sells the office block to Terence Ltd who intend to
use it has their headquarters. If Terence Ltd claims PMA on the
fixtures in the office block its qualifying expenditure is limited
to Cassandra Plc’s disposal value.
The fixture may have been a chattel or a fixture in a
different property at the time of the disposal by the past owner
and subsequently moved to the current property. Where it is
installed in the current property by the current owner, the limit
on the amount on which allowances may be claimed is the sum of the
disposal value of the past owner and any installation costs of the
current owner allowable under CAA01/S25
CA21190.
The current owner and the past owner may be the same person,
for instance where a property that includes a fixture is sold and
leased back and a CAA01/S183 election
CA26350 is made in respect of the grant
of the lease back.
CAA01/S185 does not apply if when the asset was disposed of
by the past owner or on a subsequent sale up to and including the
acquisition by the current owner, the asset was sold as a chattel
to a person not connected with the seller.
It is the responsibility of the taxpayer to obtain and
provide details of the past owner and the disposal value. Where it
seems likely that Section 185 will apply but the taxpayer does not
provide details of the previous disposal value, no allowances
should be given as the previous disposal value may be nil or
negligible.
