Capital Allowances Act 2001 section 270DC

Effect of creation of subordinate interest

Section 270DC confirms that creating a subordinate lease or other interest out of the relevant interest in a building or structure does not displace the relevant interest for structures and buildings allowance purposes, subject to an exception for long leases.

• The relevant interest in a building or structure is not lost simply because a lesser interest, such as a lease, is carved out of it.
• For example, if the freeholder holds the relevant interest and grants a short lease to a tenant, the freehold remains the relevant interest.
• An important exception applies where a lease is granted for a term of 35 years or more — in that case, the long lease itself becomes the relevant interest instead.
• This rule ensures continuity of the structures and buildings allowance entitlement through the relevant interest, while recognising that very long leases are substantively equivalent to ownership.