Capital Allowances Act 2001 Schedule 3 paragraph 36

Incoming lessee where lessor entitled to allowances

Schedule 3 paragraph 36 adds an anti-avoidance restriction to the rules allowing an incoming lessee to elect to be treated as the owner of fixtures where the lessor was entitled to capital allowances, applying to leases granted before 24th July 1996.

• Section 183 allows an incoming lessee and the lessor to jointly elect for the lessee to be treated as the owner of fixtures where the lessor was entitled to capital allowances
• For leases granted before 24th July 1996, an additional anti-avoidance rule applies to restrict the use of this election
• No election may be made if the sole or main benefit the lessor expects from granting the lease and making the election is to obtain or increase a capital allowance or deduction, or to avoid or reduce a balancing charge
• This transitional provision prevents the election mechanism from being used primarily as a tax avoidance device in relation to older leases