Case Study Qu

Question 1

What is Section 25 ?

Answer 1

Lifts, escalators and Building Alterations

Expenditure incurred on works “incidental to the installation of P&M” in an existing building.

Question 2

What are the name of 2 supporting Section 25 case law ?

Answer 2

1. J D Wetherspoons plc (2007,2010,2012)
2. B & E Security Systems Ltd 2010

Question 3

What are dilapidations ?

Answer 3

Breaches of lease covenants (agreements) relating to the physical state of a commercial property, which a tenant is responsible for repairing, redecorating, or reinstating at the end of their tenancy

Question 4

If Dilapidation payments are deemed capital, what are the implication ?

Answer 4

Capital receipts reduce the base cost of a property.

Therefore increase chargeable gains and CGT.

Question 5

What is Base Cost and how is it calculated ?

Answer 5

Base cost includes:
- Purchase Price
- Acquisition Costs (SDLT, Legal Fees)
- Capital improvements
- LESS any capital reciepts

Question 6

How did you determine the dilapidations cost was partly revenue & capital in nature ?

Answer 6

• Dilapidations report
• Schedule of Costs
• Lease Terms
• Settlement agreement

Totalled costs that are rev in nature vs Capital in nature & used that split

Question 7

When does the CGT tax arise ?

Answer 7

When the property is sold

Question 9

What does BIM35620 state ?

Answer 9

It sets the revenue v capital distinction of the works undertaken.

• Laskers Home Furnishers v Jackson

Question 10

What does BIM43255 state ?

Answer 10

Following the principles established - It states that dilapidation settlements that compensate for diminution in value, accumulated repairs or alterations to a building CANNOT be deemed a revenue deduction

Question 11

What dod the HMRC Guidance on dilapidations state ?

Answer 11

Following the principles:
- Revenue v Capital
- What it is intended to compensate for

If I need to apportion, it should follow both principles