Capital Allowances Act 2001 section 270DD

Leases granted for 35 years or more

Section 270DD deals with long leases of 35 years or more and determines when a lessee is treated as having acquired the relevant interest in a building or structure for structures and buildings allowance purposes.

• The section applies where qualifying capital expenditure has been incurred on a building or structure, a lease is granted out of the relevant interest, and the effective duration of that lease is 35 years or more.
• Where the market value of the lessor's retained interest is less than one third of the capital sum paid for the lease, the lessee is treated as acquiring the relevant interest on the grant of the lease.
• On expiry or surrender of such a lease, the lessor is treated as reacquiring the relevant interest from the lessee.
• Any part of a lease premium that is taxed as income of the lessor under the property income rules is excluded from the capital sum when applying the one-third test.