皇冠体育app

A private sector operator enters into a PFI contract with a public sector purchaser鈥漷o lease a fully equipped hospital to the purchaser, and provide non-clinical support services, for 25 years. 皇冠体育app operator constructs a hospital on land acquired for the purpose, financed by a bank loan. 皇冠体育app trade commences when the hospital is completed (see BIM64065). In return the operator receives an annual service payment, the unitary charge, which commences after the trade has started.

Accounting period 1

皇冠体育app hospital is completed at the end of the first accounting period.

For tax purposes the design and construction costs are capital expenditure. 皇冠体育app hospital is a fixed capital asset of the operator鈥檚 property business (see BIM64025 onwards). For accounting purposes the example assumes that SSAP9 鈥楽tock and long-term contracts鈥� principles are adopted during the construction period (see BIM64085). 皇冠体育app construction costs, including 拢5尘 interest on the construction loan, are debited to the work-in-progress (WIP) account and a notional sale is recognised on completion of the hospital at the end of the accounting period. For accounting purposes the hospital is therefore reported as a finance debtor on the operator鈥檚 balance sheet, under FRS5 Application Note F (see BIM64070 onwards), at a figure of 拢75尘 representing cost.

-	-	Amount	-	-	Amount
Dr	WIP account (construction costs and interest)	拢75尘	Cr	Bank	拢75尘
Dr	P&L account (costs of sales)	拢75尘	Cr	WIP account	拢75尘
Dr	Finance debtor	拢75尘	Cr	P&L account (notional sale)	拢75尘

皇冠体育app hospital is a fixed asset of a property business for tax purposes, not trading stock, and therefore the notional sale and capital construction costs are not recognised.

皇冠体育app interest is debited to an asset that falls within the definition of fixed capital project and the fixed capital asset or project rule (see BIM64295) applies. An election under BIM64325 is not possible, since the loan is for the construction of a property for use in a property business. 皇冠体育app 拢5尘 interest is therefore a non-trade debit of the accounting period (see BIM64325). If there are no other non-trading credits or debits of the period arising from the company鈥檚 loan relationships this creates a non-trading deficit.

Non-trading deficit (拢5尘).

Accounting period 2

皇冠体育app trade commences at the beginning of the second accounting period. A unitary payment of 拢15尘 is receivable. 皇冠体育app example assumes that 拢5尘 of the payment is for the provision of the hospital (property business) and 拢10尘 for the provision of support services (trading).

For accounting purposes 拢12尘 is credited to the profit and loss account (being notional interest on the finance debtor and operating income) and 拢3尘 is credited to the finance debtor.

-	-	Amount	-	-	Amount
Dr	Bank	拢15尘	Cr	P&L account	拢12尘
-	-	-	Cr	Finance debtor	拢3尘

For tax purposes we follow the accounting recognition of income in the profit and loss account, subject to any over-riding statutory or case law principle.

皇冠体育app 拢3尘 credited to the finance debtor is income and is included as an addition in the trading and property income computations (see BIM64125). 皇冠体育app proportion of the finance debtor against which the 拢3尘 credit is matched represents capital construction costs and interest that has already been relieved in accounting period 1. Neither of these is an allowable deduction of this, or future accounting periods for tax purposes. 皇冠体育apprefore no matching adjustment is required in the trading and property income computations.

Tax computations	-	Trading Income	Property Income
Income (net of depreciation)	拢12尘	-	-
Plus depreciation	拢3尘	-	-
Profit (before overheads)	拢15尘	拢10尘	拢5尘

Capital allowances can be claimed on qualifying expenditure (see BIM64375).