Capital Allowances Act 2001 section 199

Election to apportion capital sum given by lessee on grant of lease

Section 199 allows a lessor and an incoming lessee to jointly elect to fix how much of the capital sum paid for the grant of a lease is to be treated as expenditure on a fixture, for the purposes of both disposal values and plant and machinery allowances.

• When a new lessee pays a capital sum for the grant of a lease that includes fixtures on which the lessor has claimed capital allowances, the lessor and lessee may jointly elect to fix how much of that sum relates to the fixtures.
• The elected amount cannot exceed the lesser of two caps: the capital expenditure originally treated as incurred by the lessor on providing the fixture, and the actual total capital sum paid by the lessee.
• Any part of the capital sum not allocated to the fixture by the election is treated as expenditure on other property acquired under the lease; if the entire sum is allocated to the fixture, the expenditure on other property is treated as nil.
• The election cannot override restrictions where industrial buildings allowance, business premises renovation allowance, or research and development allowance has previously been claimed on the fixture, nor can it override the anti-avoidance rules on disposal values.