Capital Allowances Act 1990

11 Long leases

(1) Subject to the provisions of this section, where expenditure has been incurred on the construction of a building or structure and a long lease of that building or structure is granted out of an interest therein which is the relevant interest in relation to that expenditure, this Part shall, if the lessor and the lessee so elect, have effect as if—

(a) the grant of the lease were a sale of the relevant interest by the lessor to the lessee at the time when the lease takes effect;

(b) any capital sum paid by the lessee in consideration for the grant of the lease were the purchase price on the sale; and

(c) the interest out of which the lease is granted had at that time ceased to be, and the interest granted by the lease had at that time become, the relevant interest in relation to that expenditure.

(2) Any election under this section shall have effect in relation to all the expenditure in relation to which the interest out of which the lease is granted is the relevant interest and which relates to the building or structure or (if more than one) the buildings or structures which are the subject of the lease.

(3) Any election under this section shall be by notice to the inspector given within two years after the date on which the lease takes effect; and all such adjustments shall be made, whether by discharge or repayment of tax or by further assessments, as may be required for giving effect to the election.

(4) In this section “long lease” means a lease the duration of which (ascertained according to subsections (1) to (4) and (6) of section 38 of the principal Act) exceeds 50 years; and any question whether a lease is a long lease shall be determined without regard to section 16(5).

(5) Section 20(3) shall have effect subject to subsection (1)(c) above.

(6) This section does not apply where—

(a) the lessor and lessee are connected with each other within the terms of section 839 of the principal Act; or

(b) it appears that the sole or main benefit which may be expected to accrue to the lessor from the grant of the lease and the making of an election is the obtaining of a balancing allowance under section 4;

but paragraph (a) above shall not prevent the application of this section where the lessor is a body discharging statutory functions and the lessee a company of which it has control.