Capital Allowances Act 2001 section 360Z3

Provisions applying on termination of lease

Section 360Z3 sets out how the termination of a lease of a qualifying building is treated for the purposes of flat conversion allowances, covering situations where the lessee remains in possession, a new lease is granted under an option, or payments are made on termination.

• If the lessee stays in possession of the qualifying building after the lease ends, with the lessor's consent and without a new lease being granted, the original lease is treated as continuing for as long as the lessee remains in possession.
• Where a new lease is granted to the same lessee through the exercise of an option contained in the original lease, the new lease is treated as a continuation of the original lease rather than a separate arrangement.
• If the lessor pays a sum to the lessee on termination in respect of business premises included in the lease, the lease is treated as having ended by surrender in consideration of that payment.
• If a new lease is granted to a different lessee who pays a sum to the original lessee in connection with the transaction, the two leases are treated as a single lease that has been assigned from the original lessee to the new lessee in consideration of the payment.