Commercial Property Fixtures Claims and the CAA 2001 s.198 Election: The Buyer's Acquisition-Stage Playbook for 2026/27

On a commercial property acquisition with fixtures of any material value, the buyer's capital allowances claim lives or dies on two procedural gates, both of which can be missed at completion and neither of which can be cured after the statutory deadline. The pooling requirement at Capital Allowances Act 2001 s.187A demands that the seller allocated the relevant fixtures expenditure to a plant-and-machinery pool before completion: where the seller never claimed and never pooled, the buyer's claim is barred forever, regardless of how clean the buyer's own paperwork is. The fixed-value requirement demands that the buyer and seller jointly elect under s.198 (or apply for tribunal apportionment under s.199) within two years of completion, fixing the disposal value for both sides. Miss the election, and the buyer loses the claim with no realistic remediation route.

This page walks the s.187A pooling gate and the s.198 election mechanic, the two-year clock at s.201, the s.198(3) ceiling on the elected amount, the relationship between the s.198 election and the s.196 disposal-value Table on the seller side, the 5-step buyer due-diligence checklist for any fixtures-bearing commercial property acquisition, and two worked acquisitions: one clean (£180,000 of fixtures claimed in full) and one failed (£75,000 of fixtures lost forever because the seller never pooled).

The acquisition-side mirror to the disposal mechanic

The capital-allowances framework on commercial property treats acquisition and disposal as two sides of the same transaction. The seller's disposal-value computation runs through CAA 2001 s.196 (the 12-item fixtures Table), with the disposal value going into the seller's pool computation under s.55 (the AQE versus TDR mechanic walked in bucket sibling page C2 on balancing allowances and charges). The buyer's claim starts with the qualifying-expenditure transfer mechanism in s.198: the elected amount becomes the buyer's qualifying expenditure on the fixtures.

Without an s.198 election, the seller's disposal value defaults to the just-and-reasonable apportionment under the s.196 Table, and the buyer's claim is blocked by the s.187A pooling gate and the fixed-value requirement. With an s.198 election, the parties fix both sides of the transaction at an agreed amount, with the seller's disposal value and the buyer's qualifying expenditure aligned. The election is therefore the operative mechanism that transfers the qualifying expenditure title from seller to buyer; missing it leaves both parties exposed (seller to a possibly-inflated disposal value via the default apportionment; buyer to a zero claim).

The s.187A pooling requirement: the binary gate

CAA 2001 s.187A, inserted by Finance Act 2012 Schedule 10 with effect for completions on or after April 2014, requires that for a buyer to claim capital allowances on fixtures already in the building at acquisition, the seller (or any prior owner of the relevant interest in the chain that the seller acquired into) must have allocated the relevant qualifying expenditure to a plant-and-machinery pool. Allocation includes pooling into the main pool, the special-rate pool, claiming via AIA (which has the same pool-allocation effect for the relevant period), or claiming via FYA. The pooling must have happened in or before the chargeable period in which the disposal event occurs.

The gate is binary. Pooled = the buyer can claim if the s.198 election is also made within two years. Not pooled = the buyer cannot claim, regardless of any other claim characteristics. The pooling requirement applies to fixtures specifically (assets attached to the building as defined by general property law: integral features, lifts, electrical and water systems, fitted kitchens). It does not apply to non-fixtures plant (removable equipment the seller is taking away with them), which is outside the s.187A scope entirely.

The practical issue arises where the seller is non-taxable, has no UK tax presence, or has simply never engaged with capital allowances on the building. The most common cases in practice: charities and exempt bodies (no need to claim allowances against non-taxable rental profits); pension funds (similarly non-taxable); small landlord operators who never engaged with capital allowances; non-UK-resident sellers who claimed under their domestic tax regime but not under UK CAA 2001. In each case, the seller cannot retrospectively pool the expenditure, and the buyer's claim is permanently barred.

The s.198 election mechanic

CAA 2001 s.198(1) applies where the disposal value of a fixture is brought into account under item 1 or item 9 of the s.196 Table (sale at not less than market value, or certain other items). s.198(2) provides that the seller and the buyer may jointly elect to fix the amount that the buyer is treated as having incurred on the fixture for capital-allowances purposes (and, by symmetry, the seller's disposal value brought to pool). The election must be in writing, signed by both parties, and identify the building, the apportioned amount agreed for the fixtures, the date, the parties' names, and the predecessor's tax reference where the buyer is acquiring from a non-original-purchaser seller.

The election is the buyer's principal tool for fixing the qualifying expenditure on which the AIA, main-pool or special-rate-pool claim is computed. It is also the seller's principal tool for fixing the disposal value brought into pool, controlling the balancing charge that the seller's pool computation may produce.

The s.198(3) ceiling on the elected amount

CAA 2001 s.198(3) caps the elected amount at the lower of two figures: (a) the capital expenditure originally treated as incurred by the seller on the fixture; and (b) the actual sale price of the fixture (or the just-and-reasonable proportion of the property sale price attributable to it). The ceiling prevents the parties from manufacturing inflated fixtures expenditure beyond what the seller actually spent or beyond what the transaction actually transferred.

The practical use of the ceiling: the parties often elect at a nominal £1, with the buyer claiming the full valued amount via a separate capital allowances valuation report (subject to the s.198(3) ceiling). The £1 election fixes the seller's disposal value at £1 (so the seller's pool computation does not generate a balancing charge); the buyer's actual claim runs on the separate valuation report at the just-and-reasonable apportioned fixtures value (subject to the ceiling). The asymmetry is accepted in HMRC practice and is the standard structure for transactions where the parties want to maximise the buyer's claim while protecting the seller's pool.

The alternative is to elect at the full apportioned valuation report figure, which fixes both sides at the same amount. The seller may then face a balancing charge if the elected amount exceeds the seller's pool balance attributable to the fixtures; this is fine if the seller's pool balance is comfortable, but a known risk on a long-held property where successive WDA streams have substantially reduced the residual balance.

The two-year deadline at s.201

CAA 2001 s.201 sets the deadline for the s.198 election at two years from the date of completion of the relevant transaction. Within those two years, the buyer and seller must jointly sign the election document. After two years, the s.198 election route is closed permanently; the only fallback is the s.199 tribunal apportionment, available within the same two-year window but procedurally expensive and rarely pursued in practice.

The two-year clock should be set at the heads-of-terms stage of the acquisition, before the deal team disbands and before the seller's incentive to cooperate fades. Conveyancers without a tax brief frequently miss the election entirely; the gap typically surfaces only when the buyer's accountant raises a query in year two of ownership, by which point the clock may already be past or close to running out. The protective discipline is to add the s.198 election to the completion-day documentation pack, signed by both parties at the same time as the property transfer documentation. Sale-and-purchase agreements should include a contractual obligation on the seller to execute the election within an agreed window post-completion (typically 60 to 90 days), with the elected amount either pre-agreed or to be determined by a named expert.

The s.199 tribunal apportionment fallback

CAA 2001 s.199 provides an alternative to the s.198 election: an application to the First-tier Tribunal (Tax Chamber) for an apportionment determination. The s.199 route is available within the same two-year window as the s.198 election. It is the fallback where the parties cannot agree the apportionment, where the seller refuses to sign the s.198 election post-completion, or where there is genuine dispute about the just-and-reasonable apportionment.

The practical reality is that s.199 is rarely used. The tribunal route requires evidence, expert reports on the apportionment, and tribunal time; the cost of running a s.199 application typically exceeds the value of the fixtures claim except for very high-value commercial acquisitions. For most transactions, the practical mechanism is the s.198 election, with the parties negotiating the elected amount as part of the broader commercial deal. Where the seller is non-cooperative post-completion, the buyer's leverage is typically limited; the lesson is to lock in the seller's cooperation in the SPA itself rather than relying on post-completion goodwill.

The 5-step buyer due-diligence checklist

For any commercial property acquisition with fixtures of material value, the protective due-diligence sequence at acquisition is five steps, executed in order.

Step 1: Request fixtures pooling confirmation from the seller's capital-allowances history. The seller (via the seller's accountant) should provide written evidence that the relevant fixtures expenditure has been allocated to a plant-and-machinery pool in or before the chargeable period of the disposal. The confirmation should identify the qualifying expenditure amount, the chargeable period of pooling, and the pool (main, special-rate, or via AIA / FYA). Where the seller cannot confirm pooling, do not assume a fixtures claim is available; price the acquisition accordingly or walk away.

Step 2: Commission a capital allowances valuation report on the fixtures. The report should be performed by a specialist quantity surveyor or capital allowances consultant with the credentials to defend the valuation on inspection. The report identifies the fixtures element of the purchase consideration, splits it between main-rate and special-rate categories (integral features under s.33A go to special rate; other fixtures go to main rate), and computes the just-and-reasonable apportioned value. The report is the documentation foundation for the buyer's claim.

Step 3: Draft the s.198 election as a joint document for buyer and seller signature. The election should be drafted by the buyer's tax adviser with the elected amount agreed in advance with the seller. The typical structure is either (a) a nominal £1 election with the buyer claiming the full valued amount via the separate valuation report (subject to the s.198(3) ceiling), or (b) an election at the valued amount itself with both sides fixed at the same figure. Include the building identification, the apportioned amount, the date, both parties' names, and the predecessor's tax reference where relevant.

Step 4: Sign the s.198 election within two years of completion. The strict statutory deadline at s.201 is two years; the practical target is within 60 to 90 days of completion, while the deal team is still engaged and the seller's cooperation is fresh. Where the SPA includes a contractual obligation on the seller to execute the election within a set window, enforce the obligation immediately on completion; do not wait for the seller to initiate.

Step 5: File the election with HMRC at the next corporation tax (or income tax) return. The election is a return-time document, not a separate notification to HMRC. The buyer's CT600 or self-assessment return for the chargeable period in which the acquisition completed should claim the relevant AIA, special-rate pool addition, or main pool addition corresponding to the elected (or valued) amount, with the election retained in the buyer's documentation as the supporting evidence. HMRC's enquiry timeline is typically 12 months from the return filing date; contemporaneous documentation defends materially better than reconstructed evidence pulled together during an enquiry.

Worked acquisition 1: clean s.198 election on a £1.2m commercial unit

Consider an anonymised property SPV acquiring a freehold office unit for £1,200,000 on 15 January 2026. The seller is a corporate landlord that has owned the unit for 8 years, has consistently claimed capital allowances on the fixtures throughout, and confirms via its accountant that the relevant fixtures expenditure was originally pooled in the period of acquisition and the residual pool balance is currently approximately £85,000 main and £74,000 special-rate (after 8 years of reducing-balance WDA on the original £165,000 main plus £150,000 special-rate spend).

The buyer's specialist quantity surveyor prepares a capital allowances valuation report identifying £180,000 of fixtures value in the £1,200,000 consideration, split as £100,000 special-rate (integral features: HVAC, lighting, lifts) and £80,000 main-rate (removable kitchen, security, fire-alarm). The buyer's tax adviser drafts the s.198 election at a nominal £1, signed by both parties on completion. The buyer's CT return for the period of acquisition claims £180,000 of qualifying expenditure on the fixtures, split as £100,000 to the special-rate pool and £80,000 to the main pool. AIA absorbs the £180,000 entirely (assuming AIA cap headroom remains), giving the SPV a £180,000 first-period deduction.

The seller's disposal-value computation: with the £1 election, the seller's disposal value brought to its pool is £1 (zero balancing charge in the seller's pool computation; the residual £85,000 + £74,000 pool balances continue writing down at 18 per cent main + 6 per cent special-rate in the seller's other ongoing commercial property holdings, or run down to nil if the seller has no other commercial property in the same qualifying activity). Both sides defend on inspection; the s.198 election is the protective mechanism.

Worked acquisition 2: failed DD on a £950k industrial unit, £75k claim lost forever

Consider a property SPV acquiring an industrial unit for £950,000 on 1 March 2026. The seller is a small operating company that has owned the unit for 12 years. The buyer's due diligence requests fixtures pooling confirmation, but the seller's accountant responds that the seller never claimed capital allowances on the fixtures because the seller treated the unit as part of its trading business and never engaged with the capital allowances regime on the building.

The buyer's specialist QS report identifies £75,000 of potential fixtures value (£40,000 special-rate integral features, £35,000 main-rate). Without the seller's pooling, however, the s.187A pooling requirement bites: the buyer cannot claim allowances on the fixtures, regardless of how clean the buyer's own paperwork is. The £75,000 of fixtures value is lost forever, with no remediation route. The buyer would have absorbed the £75,000 under AIA in year one had the seller pooled; instead, the buyer's CT computation for the period of acquisition cannot include the fixtures.

The economic loss at the buyer's 25 per cent corporation tax rate is £75,000 x 25 per cent = £18,750 of corporation tax that the buyer would have saved had the fixtures been claimable. The remediation route is genuinely closed: the seller cannot retrospectively pool the expenditure because the seller never claimed it in the relevant chargeable periods; the s.198 election route is not available because the s.187A pooling gate is not met; the s.199 tribunal apportionment is not available because the pooling gate failure precedes the apportionment question. The £18,750 is a permanent loss to the buyer.

The lesson: the buyer's due diligence pre-completion was correctly performed (the pooling confirmation was requested), but the negative response did not feed back into the price negotiation. Had the buyer either renegotiated the price by approximately £18,750 (or walked away if the seller would not budge), the loss would have been offset. The buyer's deal closed at the asking price without adjustment, taking the loss inside the acquisition.

Practical mistakes to avoid

The fixtures-acquisition cluster generates a recurring set of errors. Recognising them is the cheapest way to protect the buyer's claim.

Skipping the pooling-history confirmation in due diligence. The s.187A gate is binary and absolute. Without seller pooling, the buyer's claim is dead. The pooling confirmation should be the first item in any fixtures-bearing acquisition's tax due diligence.

Leaving the s.198 election to post-completion clean-up. The two-year deadline at s.201 is hard. Conveyancers without a tax brief regularly miss the election. The protective discipline is to add the election to the completion-day documentation pack and to bind the seller's cooperation in the sale-and-purchase agreement.

Assuming the buyer can elect alone. CAA 2001 s.198(2) requires joint signature by buyer and seller. Unilateral election by the buyer alone is not effective. Lock in the seller's signature commitment before completion, not after.

Inflating the elected amount above the s.198(3) ceiling. The ceiling at the lower of the seller's original expenditure or the actual sale price is hard. The £1-elected-amount-with-separate-valuation structure is the planning workaround that respects the ceiling while maximising the buyer's claim.

Claiming full expensing on fixtures already in the building. Full expensing under CAA 2001 s.45S requires unused-and-not-second-hand plant. Fixtures already in the building at acquisition fail both limbs. AIA up to the £1 million group cap is the route for fixtures; full expensing applies to unused new plant the buyer separately acquires post-completion. Bucket sibling page C5 covers full expensing in detail.

Forgetting the AIA associated-companies sharing rules. AIA at £1 million is shared across associated companies under CAA 2001 ss.51A-51N. A property HoldCo plus three SPVs typically gets one £1 million cap, not four; if the cap is already partly used elsewhere in the group in the relevant period, the AIA available for the current acquisition is reduced. Bucket sibling page C4 covers the sharing rules in detail.

Treating non-fixtures plant as subject to s.187A. The pooling requirement applies to fixtures (attached to the building under general property law). Non-fixtures plant (removable equipment the seller is taking away) is outside the s.187A scope; the buyer acquires that separately under the usual chattels-sale rules with no pooling-gate constraint.

Sources and statutory references

1. Capital Allowances Act 2001, section 187A (Pooling requirement; introduced by FA 2012 Sch 10 with effect April 2014).
2. Capital Allowances Act 2001, section 196 (Fixtures disposal-value Table, seller-side 12-item Table).
3. Capital Allowances Act 2001, section 198 (Fixtures: election to apportion sale price on sale of qualifying interest; s.198(3) elected-amount ceiling).
4. Capital Allowances Act 2001, section 199 (Fixtures: tribunal determinations as alternative to s.198 election).
5. Capital Allowances Act 2001, section 201 (Two-year time limit for s.198 election and s.199 tribunal application).
6. Capital Allowances Act 2001, section 33A (Integral features: special-rate expenditure within fixtures scope).
7. Finance Act 2012, Schedule 10 (Fixtures regime reforms: pooling and fixed-value requirements for completions on or after April 2014).
8. HMRC Capital Allowances Manual, CA26450 (fixed-value requirement), CA28500 (s.198 election), CA26000+ (fixtures regime general).
9. Tower MCashback LLP1 v HMRC [2011] UKSC 19 (seminal case on capital allowances claim entitlement, pooling and fixtures-election context).

Related reading on this site: bucket sibling pages C1 (the four-axis CAA 2001 decision framework pillar); C2 (disposal mechanics: the seller-side mirror to this acquisition-side page); C3 (SBA depth: the building-shell counterpart to the fixtures regime); C4 (AIA + associated-companies sharing rules); C5 (full expensing: unused-and-not-second-hand test that excludes fixtures already in the building). Adjacent existing pages: Capital Allowances on Commercial Property: what can claim; Integral Features Capital Allowances.