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A private sector operator enters into a PFI contract with a public sector purchaser, an NHS Trust, to build a hospital and provide non-clinical support services for 25 years. In return the operator receives an annual service payment, the unitary charge. »Ê¹ÚÌåÓýapp hospital belongs to the Trust throughout the period of the contract. »Ê¹ÚÌåÓýapp Trust grants a right of access, or licence, to enable the operator to do no more than go on to the land to provide the construction, support and ancillary support services.

For tax purposes, the operator’s trade is the provision of design, construction and support services. »Ê¹ÚÌåÓýapp operator is not carrying on a property business since it is not exploiting, as a source of rent or other receipts, the right/licence granted by the purchaser. »Ê¹ÚÌåÓýapp operator has not acquired the hospital as a fixed capital asset of a business, or as trading stock.

»Ê¹ÚÌåÓýapp cost of building the hospital is revenue expenditure for tax purposes and is an allowable trade deduction when it is written off to the profit and loss account, or relieved against income receivable (see BIM64130).

»Ê¹ÚÌåÓýapp accounting treatment is of limited assistance in determining the scope of the PFI trade. If FRS5 Application note F is applicable, ownership of the hospital may not be reflected in its accounting treatment, i.e. it may be reported as either a financial asset or a fixed asset on the balance sheet (see BIM64070 onwards).

See also BIM64035.