Capital Allowances Act 2001 section 301

Purchase of building within 2 years of first use

Section 301 provides special rules for enterprise zone buildings that are sold within two years of first being used, resetting the capital allowances position for the purchaser.

• Where an enterprise zone building is sold after first use but within two years of that first use, the seller's capital allowances position is closed off through a balancing adjustment, and any remaining qualifying expenditure is disregarded going forward
• The purchaser is treated as having incurred fresh qualifying enterprise zone expenditure, and the building is treated as if it had never been used before the date of the sale
• The amount of the purchaser's qualifying enterprise zone expenditure is generally the lower of the price paid and the original construction cost, but different rules apply where a property developer constructed the building and sold it in the course of their development trade
• Where a developer is involved and the developer's sale is the relevant sale, the full purchase price counts as qualifying enterprise zone expenditure; where a developer sold the building earlier and the relevant sale is a subsequent transaction, the qualifying expenditure is the lower of the purchase price and the price paid on the developer's earlier sale