The Section 198 Election When You Buy a Dental Practice: Fixtures, the Value Negotiation and the 2-Year Deadline

There is an election most dental practice buyers never hear about until it is too late. When you buy a practice with existing fixtures, the chairs plumbed in, the surgery wiring, the heating and ventilation, the cabinetry built into the walls, the capital allowances on those fixtures do not pass to you automatically. They have to be fixed by a joint election, and if that election is not made, your claim on the inherited fixtures can be lost entirely.

This guide is built around one idea: the buyer and the seller want directly opposite things from that election. Understanding why, and how the two sides land on a number, is the difference between inheriting tens of thousands of pounds of future relief and inheriting nothing. We cover what a fixture is, how the election works, the conditions that gate it, and the 2-year deadline that quietly destroys claims.

The election most practice buyers never hear about until it is too late

Buy a practice and you buy a building full of plant that has become part of the structure: integral features and plumbed-in surgery kit. The capital allowances on that plant sit in the seller's pool. They do not transfer to you by default. A joint election under CAA 2001 section 198 fixes the value attributed to those fixtures, and that fixed value becomes your qualifying expenditure. Without it, and without meeting the conditions below, the buyer's fixtures claim can disappear. This is house position §7 territory: the election and its deadline are among the most common preventable losses in a practice purchase.

What a fixture is for section 198, and what it is not

The fixtures regime applies to plant and machinery that has become part of the building. In a dental practice that means the integral features (the electrical and lighting installation, cold and hot water systems, heating, ventilation and air conditioning) plus surgery equipment that is plumbed in or bolted down. These are fixtures, and they go through the election.

Loose, moveable equipment is different. Free-standing instruments, hand tools and portable devices are not fixtures; they are dealt with by an ordinary just-and-reasonable apportionment of the purchase price, not the fixtures regime. A practice sale therefore usually needs both mechanisms running side by side. The same categories of plant, bought new in a fit-out rather than inherited on a purchase, follow the pool-split rules instead, because in a fit-out there is no seller to elect with.

How the election works: a joint, signed, fixed value

Section 198 lets the seller and buyer jointly elect the amount attributed to the fixtures. The mechanism is elegant in its symmetry: the elected figure becomes the buyer's qualifying expenditure and the seller's disposal value at the same time. Because it is one figure doing both jobs, the two sides always match, and HMRC sees a single consistent number on both tax returns. The election is signed by both parties and retained; there is no separate filing, but it must exist and be capable of production.

The cap: you cannot elect more than cost or sale price

The elected figure is bounded. It cannot exceed the lower of the seller's original qualifying expenditure on the fixture, or the actual sale price (CAA 2001 section 198). This is why a buyer cannot simply invent a high number to inflate the claim; the value is capped by history. The legal floor is £1. So the whole negotiation plays out in the band between £1 and that cap, which is exactly where buyer and seller pull against each other.

The 2-year deadline: the cliff edge

The election must be made no later than 2 years after the buyer acquires the qualifying interest in the property (CAA 2001 section 201). This is a hard statutory deadline with no general discretion to extend. Miss it and the parties can no longer fix the value by election; the buyer's fixtures claim is, in practice, lost.

This is the single most preventable loss in a practice purchase. The 2-year clock starts at acquisition, runs quietly in the background while everyone moves on to running the practice, and then closes. By the time anyone notices, it is too late. Diarise it at completion, and better still, agree the draft election before exchange so it is done at completion rather than chased afterwards.

What makes the deadline so dangerous is that the period between completion and the cliff edge is precisely the period when a new owner is least likely to be thinking about it. The first two years after buying a practice are consumed by transition: retaining staff and patients, getting to grips with the NHS contract, sorting systems, perhaps starting a refurbishment. Capital allowances on inherited fixtures are an abstract, invisible benefit, and there is no annual prompt that forces the issue, no form that bounces, no penalty notice. The relief simply expires in silence. That is exactly why the discipline has to be built in at the deal stage, when advisers are engaged and the seller is still co-operative, rather than relied upon to surface organically later.

It also pays to be clear that the deadline is about making the election, not about claiming the allowances. A buyer who makes a valid election in time can then claim the allowances over many future years in the normal way. A buyer who misses the election window has nothing to claim, this year or any year. So the 2-year clock is not a deadline for using the relief; it is a deadline for securing the right to it at all.

The negotiation: buyer and seller want opposite things

This is the heart of it. The buyer wants a HIGH elected value: more qualifying expenditure means more allowances to write down and faster future relief. The seller wants a LOW elected value, because the elected figure is the seller's disposal value, and a high disposal value triggers a balancing charge that claws back allowances the seller has already claimed over the years of ownership.

So the election is a genuine commercial negotiation, not a formality. Every pound the buyer gains in future relief is, broadly, a pound the seller pays in a balancing charge today. Neither side can dictate; the cap limits the buyer's ceiling and £1 is the seller's floor, and the settled figure usually lands somewhere sensible in between, often near the fixtures' tax written-down value or a price-adjusted compromise that reflects the rest of the deal.

Because the interests are equal and opposite, the election behaves like any other price term in the deal, and it should be negotiated with the same seriousness. A buyer who treats it as paperwork to be signed at completion has already conceded the point, because by then the seller's accountant will simply propose £1 and there is no leverage left to argue otherwise. The leverage exists earlier, while the headline price is still in play, because the two are connected: a buyer who accepts a low fixtures election is giving up future tax relief, and that lost relief is a real cost that can legitimately be reflected in what the buyer is willing to pay for the practice overall.

There is also a timing dimension to the seller's resistance that a buyer can use. The seller's balancing charge crystallises in the year of sale, often the same year the seller is also realising a large capital gain on the goodwill. If the seller is already managing a significant tax bill on exit, the marginal pain of a balancing charge may be more acute, which strengthens the seller's case for a low election. Understanding the seller's overall exit position, rather than just the fixtures line, is what lets a buyer judge where a realistic settlement sits.

The seller's balancing charge, explained in numbers

To see why the seller resists, follow the seller's pool. The fixtures originally cost the seller, say, £120,000. After years of writing-down allowances, the written-down value of those fixtures in the seller's pool is now only £20,000, because the seller has already had £100,000 of relief. If the parties elect a high disposal value, say £90,000, the seller must bring £90,000 out of the pool against a £20,000 balance, producing a balancing charge of roughly £70,000 of taxable income in the seller's final computation. That is real tax for the seller, which is exactly why the seller pushes the election down. The balancing-charge mechanics live in CAA 2001 sections 55 to 59, and the same logic explains why AIA-relieved kit still carries a disposal value on a later sale.

The fixed-value requirement and the pooling requirement

Two further conditions gate the buyer's claim, both in force since April 2014 (CAA 2001 section 187A). First, the pooling requirement: the seller must have pooled the qualifying expenditure on the fixtures before the sale. Second, the fixed-value requirement: a fixed value must be agreed, by section 198 election or, failing agreement, by a First-tier Tribunal determination.

The pooling requirement is the trap most buyers overlook. If the seller never pooled the fixtures, there may be nothing for the buyer to elect over, and the claim fails regardless of how willing both parties are to sign. A buyer who skips due diligence on whether the seller ever pooled can find, at completion, that the chain is broken. Checking the pooling history is not optional; it is the first question to ask.

It is worth understanding why the pooling requirement exists at all, because it explains how the chain can break. Before April 2014, fixtures allowances could be claimed and re-claimed down a chain of owners without a consistent record, which meant the same expenditure could effectively be relieved more than once across successive sales. The fixed-value and pooling requirements were introduced to close that down: an owner who wants to pass fixtures allowances on must first have brought the expenditure into their own pool, and the value passed on must be fixed. The consequence for a dental buyer is that the relief is only as good as the weakest link in the ownership chain. If a previous owner three transactions ago never pooled, the entitlement may have been extinguished at that point, and no amount of co-operation between the current buyer and seller can resurrect it.

This is why the practical due-diligence question is not just "will you sign an election?" but "can you show me the fixtures were pooled, and on what figures?". A seller who can produce a clean capital allowances history, including the section 198 statement from when they bought, gives the buyer both the entitlement and the ceiling for the new election in one document. A seller who cannot is a warning sign that the fixtures claim may be compromised before the negotiation even begins.

Why the section 198 value sits inside the wider price apportionment

The fixtures figure is a sub-component of the broader split between goodwill, property and tangibles. A buyer pushing a high fixtures value is also shifting that apportionment, and the seller's capital gains tax and Business Asset Disposal Relief position on the goodwill interacts with where the price lands. We keep the capital gains detail light here, but the point stands: the section 198 negotiation does not happen in a vacuum. It is one lever inside the overall deal, and both advisers should model it as part of the whole, not in isolation.

Due diligence: what to demand before exchange

Treat the fixtures position as a financial due-diligence item, not a post-completion tidy-up. Before exchange, demand: the seller's capital allowances history; confirmation the fixtures were pooled; the existing section 198 statement from when the seller bought the practice (if there is one), which sets the ceiling on what can now be elected; and a draft election agreed in the contract. This belongs squarely on the purchase due-diligence checklist, alongside the contract, accounts and NHS position.

Getting the election into the deal: solicitor and accountant together

The election is a tax document that lives in a legal contract, which is precisely why it falls through the cracks. The accountant has to value the fixtures and produce the figure; the solicitor has to paper it inside the sale agreement. If neither owns the hand-off, the election becomes a post-completion afterthought, and post-completion is exactly when the seller has least incentive to co-operate and the deadline is already running down. Raise it in the heads of terms so it is on the table from the start, not bolted on at the end.

The cleanest way to handle it is to make the election a condition of the sale contract, with the agreed figure stated and an obligation on both parties to sign the formal election within a set period after completion. That removes the risk that a co-operative seller becomes an uncontactable one once the money has changed hands. It also forces the value to be settled while there is still negotiating leverage, rather than left as an open item to be argued about later. Where the seller is a retiring principal who intends to wind down quickly, getting the signed election in the contract is especially important, because chasing a signature from someone who has moved on, possibly abroad, possibly disengaged from their old advisers, is exactly how a valid claim quietly dies inside the 2-year window.

For the buyer's accountant, the work is to value the fixtures within the cap, model the future relief the election unlocks, and give the buyer a clear number to negotiate around. For the solicitor, the work is to ensure the election is properly drafted, signed by both parties, and retained, and that the contract obliges the seller to co-operate. Neither professional can do the other's job, and the deal needs both engaged on the point from the outset. The cases that go wrong are almost never cases where someone made a bad valuation judgment; they are cases where nobody owned the task and the deadline simply passed.

Worked examples

Example A: the buyer-versus-seller tension in numbers

A practice sells in the 2026/27 tax year. The fixtures originally cost the seller £120,000; after years of allowances, the seller's pool value for them is £20,000. The seller proposes electing £1 (the legal minimum) to avoid any balancing charge. The buyer wants to elect the market value, say £90,000, to claim allowances on £90,000.

If they elect £90,000, the seller faces a balancing charge on roughly £70,000 (disposal value £90,000 less pool value £20,000), increasing the seller's tax bill. If they elect £1, the buyer gets almost nothing to claim. The parties typically land on a negotiated figure between the two, often near the £20,000 tax written-down value or a price-adjusted compromise that shares the difference, sometimes traded off against a movement in the headline price. (Tagged 2026/27, house position §7.)

Example B: the cost of missing the deadline

A buyer completes in May 2026, never makes the election, and discovers the omission in late 2028. The 2-year window from acquisition closed in May 2028. No election can now be made, and the fixtures claim is lost. If the fixtures element was around £80,000, the relief forfeited, whether it would have come through the AIA or the 6%/14% pools, is real money, permanently gone and not merely deferred to a later year. (Tagged acquisition May 2026, deadline May 2028, house position §7.)

Example C: the pooling trap

A buyer agrees a £70,000 fixtures election, only to learn at completion that the seller-of-the-seller never pooled the fixtures. The chain is broken: the current seller has no pooled qualifying expenditure to transfer, so there is nothing to elect over, and the £70,000 figure is worthless. The lesson is that due diligence on the seller's pooling history matters before exchange, not after, because by completion it is too late to fix a broken chain. (Tagged 2026/27, house position §7.)

Common errors

• Assuming the allowances pass automatically on purchase, when they do not without a valid election.
• Missing the 2-year section 201 deadline and forfeiting the fixtures claim permanently.
• Failing to check the seller actually pooled the expenditure, breaking the section 187A chain.
• Accepting the seller's low election without modelling the lost future relief to the buyer.
• Not specifying the election in the heads of terms, so it becomes a post-completion afterthought no one owns.

The section 198 election rewards the buyer who treats it as a live commercial term from the first conversation, and quietly punishes the one who leaves it until the deal is done. We once acted for a buyer who came to us six weeks before the 2-year deadline with no election in place; we agreed a fixtures value with the seller's accountant and filed in time, preserving a five-figure allowance that would otherwise have been lost. The deadline is fixed, the conditions are knowable, and the negotiation is winnable, but only if the election is on the table early. Once you understand how the fixtures inherit, the next planning question is usually when to time the post-completion equipment AIA.