Sale and leaseback or sale and finance leaseback: election for special treatment
227Circumstances in which election may be made
(1)Section 228 applies if—
(a)B enters into a relevant transaction with S,
(b)the plant or machinery—
(i)is within section 216(1)(b) (sale and leaseback), or
(ii)is the subject of a sale and finance leaseback (see section 221),
(c)the conditions set out in subsection (2) are met, and
(d)B and S elect that section 228 should apply.
(2)The conditions are—
(a)that S incurred capital expenditure on the provision of the plant or machinery,
(b)that the plant or machinery was unused and not second-hand at or after the time when it was acquired by S,
(c)that the plant or machinery was acquired by S otherwise than as a result of a transaction to which section 217, 218, 223 or 224 applies,
(d)that the relevant transaction is effected not more than 4 months after the first occasion on which the plant or machinery is brought into use by any person for any purpose, and
(e)that S has not—
(i)made a claim for an allowance under this Act in respect of expenditure incurred on the provision of the plant or machinery,
(ii)made a tax return in which such expenditure is taken into account in determining his available qualifying expenditure for the purposes of this Part, or
(iii)given notice of any such amendment of a tax return as provides for such expenditure to be so taken into account.
(3)In subsection (2)(b) and (c), the references to the plant or machinery being acquired by S are, in a case where the relevant transaction between S and B falls within section 213(1)(c) (assignment), references to the making of the contract the benefit of which S assigns to B.
(4)An election under this section—
(a)must be made by notice to the Inland Revenue no later than 2 years after the date of the transaction, and
(b)is irrevocable.
(5)Nothing in—
(a)section 42 of, or Schedule 1A to, TMA 1970 (claims and elections for income tax purposes), or
(b)paragraphs 54 to 60 of Schedule 18 to FA 1998 (claims and elections for corporation tax purposes),
applies to such an election.
(6)In subsection (4) “the date of the transaction” means the date of the sale, the making of the contract or the assignment referred to in section 213(1)(a) to (c).
228Effect of election: relaxation of restriction on B’s qualifying expenditure, etc.
(1)The effect of an election under section 227 in relation to B is that subsections (2) and (3) apply instead of section 218 or 224 (restriction on B’s qualifying expenditure).
(2)The amount, if any, by which B’s expenditure under the relevant transaction exceeds D is to be left out of account in determining B’s available qualifying expenditure.
(3)D is whichever of the following is the smaller—
(a)if S incurred capital expenditure on the provision of the plant or machinery, the amount of that expenditure;
(b)if a person connected with S incurred capital expenditure on the provision of the plant or machinery, the amount of that expenditure.
(4)Nothing in subsections (1) to (3) prevents section 225 from applying.
(5)The effect of an election under section 227 in relation to S is—
(a)that no allowance is to be made to S under this Act in respect of the capital expenditure on the provision of the plant or machinery, and
(b)that the whole of that expenditure must be left out of account in determining the amount for any period of Ss' available qualifying expenditure for the purposes of this Part.