Case Study
The £300,000 Missed Claim
A property investor purchased a £2 million commercial building expecting to claim Capital Allowances, but a solicitor oversight on elections created a major tax setback.
Overview
A property investor purchased a £2 million commercial building expecting to claim Capital Allowances on plant and machinery. The solicitor failed to insert a valid section 198 election in the purchase contract.
What happened?
The transaction completed, but key Capital Allowances requirements were missed.
- The seller had previously claimed allowances and no elections were produced at disposal, so no disposal value was agreed.
- Without a valid section 198 election in place, all savings were clawed back.
What was missed?
No valid section 198 election was included in the contract, so disposal value treatment failed and allowances were lost.
How a CA Specialist would have prevented this
Early specialist input would have protected relief and prevented the clawback.
Due diligence before purchase
Confirmed election history and disposal value position before exchange.
Contract wording review
Ensured the legal wording properly protected purchaser entitlement.
Section 198 election preparation
Produced a compliant CAA 2001 section 198 election setting disposal value correctly.
Vendor savings retained
Structured the election so vendor savings remained protected.
Key lesson
If your solicitor does not understand Capital Allowances, they can cost you hundreds of thousands of pounds.