Introduction Background Note
38.At Budget 2011, the Government announced that it would consult on proposals to ensure that the capital allowances rules for fixtures secured their original policy purpose of limiting allowances overall to the fixture’s original cost. That is, that the cost of a fixture should be written-off once, and once only, during that fixture’s useful economic life.
39.The Government decided to act in order to protect the Exchequer from further tax leakage and to make the rules fairer and clearer for businesses to understand and operate - without giving rise to disproportionate administrative burdens.
40.A formal consultation was launched on 31 May and closed on 31 August 2011.  The Government’s formal response to the consultation was published on 6 December 2011, together with a draft of the proposed legislative provisions, for a period of technical consultation, which closed on 10 February 2012.  Following this technical consultation some changes have been made to the draft provisions to help ensure the fairer application of the new rules, and these changes are highlighted in the detail of this Explanatory Note.
41.The fixtures legislation is contained in Chapter 14 of Part 2 of the Capital Allowances Act 2001 (CAA). To deliver the policy purpose - that expenditure on a fixture should be written-off against taxable profits only once over its economic life - the current legislation contains rules to limit the allowances that can be given to the lower of original cost (section 62 CAA) or the last disposal value that has been brought into account by any previous owner of the fixture (section 185 CAA).
42.However, the current law does not prescribe when expenditure on fixtures should be pooled, and there is no time limit laid down to govern when a seller and purchaser should agree the part of the sale price of a property that should be attributed to the fixtures.
43.These gaps have given rise to uncertainties and difficult questions of proof.  They have led to a large number of 'late' claims by current owners at a time when a single sale value for fixtures can no longer be agreed and brought into account by both parties.
44.This section and Schedule are designed to address these practical problems with the existing legislation, in order to ensure that the fixtures regime operates as originally intended in future.
45.An additional technical, fixtures issue, in relation to the Business Premises Allowances scheme (in Part 3A of CAA), emerged during the Government’s consideration of its proposed fixtures changes for Finance Act 2012.  The Government decided to address this issue at the same time as the other changes.