The Commercial Property Standard Enquiry form (CPSE)


Questions 32.1 – 32.10 relate to capital allowances within the property that is being sold.

Following the change in legislation introduced in April 2014, any commercial property transaction taking place after this date, capital allowances have to be:

• included within the purchase contract,
• having been pooled by the vendor, and
• a joint election (s198CAA2001) agreed between vendor & purchaser,

…otherwise the capital allowances on any qualifying items within that property will be lost for ever.

When looking to buy or sell a commercial property a key document supporting the main purchase contract is the CPSE replies “completed” by the vendor’s solicitor, although these questions are often expected to be completed by the vendors capital allowances adviser – you (see Q32.10)

Question 32.1 of the CPSE replies requires the vendor to initially provide the details of whether they held the property on capital account as an investor/owner or on revenue account as a developer/property trader.

Developers holding properties as trading stock have no entitlement to capital allowances, so in these circumstances the process for the purchaser is much simpler as they will become the first owner with entitlement to all available capital allowances.

Where the property is held on capital account the vendor is obliged to answer Q32.2 – 32.10 to establish the capital allowances that are being included with the sale of the commercial property.

Unfortunately all too often this element of the contract isn’t treated with the gravity it deserves and experience has shown that answers can range from completely ignoring the questions to a simple “No”, “N/A” and “unknown”.

Clearly this prejudices the purchaser’s position and is unacceptable.

Where these unhelpful and inconclusive replies have been further investigated, often the vendors and their solicitors have deliberately been unclear as they fear that including capital allowances within the purchase contract will lead to a balancing charge and an additional tax liability for the vendor.

This is not the case if the questions are answered correctly – only if the capital allowances included within the contract exceed the vendor’s unrelieved pool will there be any tax charge for the vendor. This can’t happen if the CPSE is completed correctly.

If the unrelieved capital allowances are correctly identified, pooled and a joint election
entered into, there will no additional tax liability for the vendor, BUT the purchaser will
secure a very valuable tax relief.

Getting the capital allowances wrong on the CPSE will not only result in allowances being
lost, for ever, but can be a very expensive mistake to make as this very issue has resulted
in claims against Professional Indemnity insurance, by disgruntled purchasers.

For your information, below are the CPSE questions – do you have the necessary details
readily available to answer these questions on your client’s behalf?

This article is for information purposes only and does not constitute advice. For further
information please feel free to contact us.
This article was written by Richard Hier from Elect Capital Allowances Limited, 01889 740 405
Regulated by RICS