It’s been a year since the capital allowances legislation came into force. Now the dust has settled, it would appear that capital allowances have not made life easy for solicitors.
Research conducted in January 2015 by the Law Society and Catax Solutions showed that solicitors can be confused about their responsibilities, often lack crucial information from clients and worry about administrative costs and delays. While capital allowances may just seem like the straw on the camel’s back for conveyancing solicitors, paying closer attention may reap large rewards for clients: Catax estimates that, based on transaction volumes between 1 April and 31 December 2014, buyers and sellers have missed out on an opportunity to claim over £1.6 billion*.
Why is so much going unclaimed? Our research shows that over 60% of solicitors believe that making sure the capital allowances position of a property has been assessed is the responsibility of of another professional, rather than themselves.
|The seller’s accountant||62%|
|The purchaser’s accountant||60%|
|The purchaser’s solicitor||37%|
|The seller’s solicitor||32%|
|The property agent||9%|
|Another department in my organisation||2%|
Furthermore, when the topic of capital allowances is discussed, most solicitors (81%) would refer their client to other experts for the completion of section 32 of the Commercial Property Standard Enquiries (CPSE) form. Very few solicitors have developed in-house capital allowances expertise, meaning that the client is left with the burden of sourcing a suitable professional.
It is here where solicitors could be missing a trick: taking a greater role in the process would enable solicitors to be in greater control of the process, provide greater client care and ensure that the capital allowances position is assessed by a true expert.
Very few solicitors have developed in-house capital allowances expertise, meaning that the client is left with the burden of sourcing a suitable professional.
Similarly, few solicitors are producing a form of election notice for clients,which poses a risk to both the buyer and the seller. Even though there may still be an opportunity for the seller to claim if an election isn’t entered into, the buyer will not be able to claim in line with the mandatory pooling requirements. Furthermore, for the seller to claim, it is highly likely they will need to claim prior to the sale of the property or they will need the approval of the new owner. Solicitors are also unaware that it is their responsibility to produce a section 198/199, Capital Allowances Act 2001 election in every transaction, with less than half of our respondents getting this correct.
By not addressing the issue of capital allowances in detail solicitors are both missing out on a way to improve client care, and exposing themselves to risks ranging from loss of fee income to litigation.
Fortunately for busy solicitors, however, there are easy ways to overcome these issues. Through our partnership with Catax Solutions, the Law Society offers its members access to the information and advice they need.
Download the full report here to find out more about capital allowances and how best to deal with them.
*based on 85,080 non-residential transactions and the average sale price of £4,720,751.