»Ê¹ÚÌåÓýapp

A private sector operator enters into a PFI contract with a public sector purchaser, a local authority, to build a road and maintain it for 25 years. In return the operator receives an annual service payment, the unitary charge. »Ê¹ÚÌåÓýapp land, including the completed road, belongs to the local authority throughout the period of the contract. »Ê¹ÚÌåÓýapp local authority 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 and support services.

For tax purposes, the operator’s trade is the provision of design, construction and maintenance 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 road as a fixed capital asset of a business, or as trading stock.

»Ê¹ÚÌåÓýapp cost of building the road is revenue expenditure for tax purposes and will be 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 road 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.