Capital Allowances Act 2001 section 227

Circumstances in which election may be made

Section 227 sets out the conditions under which a buyer (lessor) and seller (lessee) may jointly elect for a special treatment of capital allowances in sale and leaseback transactions involving new and unused plant or machinery.

• Both parties must jointly elect for the special treatment to apply, and the election must be made within 2 years of the transaction date and is irrevocable once made
• The plant or machinery must have been new and unused when acquired by the seller, and the seller must have incurred capital expenditure on it without the asset having been subject to previous sale and leaseback restrictions
• The sale and leaseback transaction must be completed within 4 months of the plant or machinery first being brought into use by any person for any purpose
• The seller must not have claimed any capital allowances, included the expenditure in a tax return, or amended a tax return to include the expenditure on the plant or machinery