The Section 198 Election, also known as the Fixed Value Requirement, is an important aspect of capital allowances under the Capital Allowances Act (CAA) 2001.

Many people overlook or misunderstand this election, but it holds significant implications for businesses involved in commercial property transactions.

For instance, failing to make the Section 198 Election can result in a complete loss of capital allowances.

In this article, we will provide a comprehensive overview of the Section 198 Election and explain its significance for UK taxpayers looking to claim capital allowances on commercial property.

What is Section 198 Election?

The Section 198 Election pertains specifically to the fixed value requirement for fixtures within commercial properties.

The fixed value requirement means that both the buyer and seller in a property transaction must agree on the value at which the fixtures within the property will be transferred.

To ensure this, the parties sign an election under Section 198, which ensures that the seller’s disposal value for the fixtures always matches the buyer’s purchase cost for capital allowances purposes.

Why is it important?

This election is crucial because it has been the standard method for determining the transfer values of fixtures since April 2012.

Sellers who have claimed capital allowances must pool their qualifying expenditures and enter into a Section 198 Election to transfer the capital allowances to the buyer. Additionally, sellers are now required to pool qualifying expenditures, even if they haven’t made any claims for capital allowances since April 2014.

Failure to address the transfer of claimed capital allowances during a sale means the seller retains the capital allowances, and the buyer receives nothing.

Similarly, if the seller hasn’t claimed capital allowances and this is not discussed during the sale, the buyer or any future owner loses the opportunity to claim these capital allowances permanently.

This is where the Section 198 Election becomes crucial. By making this election, the buyer can receive the seller’s entitlement to capital allowances on fixtures, even if the seller has already claimed them.

This can be highly advantageous for the buyer, leading to a higher capital allowances claim and a lower tax liability.

Content in a Section 198 Election

To ensure the validity of a Section 198 Election, certain information must be included as outlined in Section 201 of the CAA 2001.

This information includes the disposal amount fixed by the election, the names of each taxpayer making the election, sufficient details to identify the fixtures and relevant land, the relevant interest acquired by the purchaser in the property, and the Unique Taxpayer References (UTR) of both taxpayers.

Invalid Section 198 Election

If the Section 198 Election fails to meet the requirements listed above, it will be considered invalid and won’t serve as evidence of the disposal value or purchase value for the fixtures.

Failing to make the election means failing to meet the fixed value requirement, which results in the inability to claim any plant and machinery allowances for that fixture.

The qualifying expenditure incurred by the new buyer will be treated as nil.

When is the deadline?

The Section 198 Election must be completed within two years of the completion date of the property sale.

This time limit refers to the submission of the election to HMRC, not just its signing.

However, if one of the parties involved requests a tribunal to decide the disposal value, the time limit extends until the tribunal reaches a decision, which then becomes final and cannot be changed.


In summary, the Section 198 Election is crucial for property businesses engaged in commercial property transactions, considering the strict fixed value requirements of the CAA 2001.

Failing to make this election can result in the loss of entitled capital allowances, so it’s essential not to overlook it.

By understanding and completing the Section 198 Election accurately, both parties can ensure they claim capital allowances correctly and avoid missing out on valuable tax saving.

How we can help

At Williamson & Croft, we have extensive experience in navigating the complexities of capital allowances and the Section 198 Election.

We understand the significance of this election for businesses involved in commercial property transactions and the potential loss of valuable tax savings if it is overlooked.

Our team of experts is well-versed in the requirements and intricacies of the Section 198 Election, and we can provide comprehensive guidance and support throughout the process.

We will ensure that all necessary information is included in the election, making it legally binding for both parties and maximising your chances of successfully claiming capital allowances on fixtures.

By leveraging our team’s knowledge and expertise, we can help you avoid costly mistakes, optimize your capital allowances claim, and ultimately enhance your tax position.

Contact us today for further information.