36 |
(c) which falls within the description of sale and leaseback ie if the asset which has been used in the sellers’ business continues to be so used despite the sale.335 (c) also has to be extended to similar situations in which the asset is used by a connected person or there is no continuity in the seller’s business. The restrictions are that the buyer cannot obtain a first year allowance336 and writing down allowances are given to the purchaser by reference to the disposal value brought into account by the vendor.337 |
Further and similar restrictions apply if the transaction is a finance lease338 or, yet another category, a sale and leaseback involving a finance lease.339 A finance lease is a lease which is treated in the accounts of the lessor (or a person connected with the lessor) as a finance lease or loan under properly drawn up accounts. No writing down allowance is to be given for that part of the chargeable period which falls before the expenditure was incurred; the effect of this is to delay, not prohibit, the entitlement to the allowance for the expenditure incurred.340 The rule does not apply if there is also a disposal of the asset in the same period.341 |
| Where there is a sale and finance leaseback, meaning a sale and leaseback where a finance lease is involved, five provisions apply. First section 222 rules restricts the amount to be taken by the seller as the disposal value; this is subject to section 225 (at risk) rule. Then section 223 removes any entitlement to a first year allowance on the part of the buyer. Section 224 restricts the buyer’s writing down allowances to values calculated by reference to the seller’s disposal value. Section 225 then removes any entitlement to any allowances if the lessor’s is not bear the greater part of the risk of non-payment; for this purpose guarantees by the persons connected with the lessee are ignored. Finally section 226 limits the qualifying expenditure on certain subsequent transactions. |
| These rules are subject to some degree of mitigation. There is a special election for both sale and leaseback and sale and finance leaseback where the transaction involve assets which are both new and unused.342 There is a provision to explain how these rules apply to hirepurchase contracts; this does not involve new and unused assets.343 Finally there is an exception, once more involving new and used assets, sold by manufacturer or suppliers in the ordinary course of their business.344 |
24A.3 Industrial Buildings |
24A.3.1 General |
| 24A.3.1.1 Structure of Allowances |
| The only initial allowance mentioned in CAA 2001 relates to certain expenditure in enterprise zones.345 These rules permit initial allowances to be claimed where a person incurs capital |