»Ê¹ÚÌåÓýapp

»Ê¹ÚÌåÓýapp legislation acts to cap the amount that can be deducted inside the contractor ring fence. It does this by applying a fixed percentage, the relevant percentage, to an identified amount of expenditure, being the amount paid out for the asset and its enhancement.

»Ê¹ÚÌåÓýapp relevant percentage

»Ê¹ÚÌåÓýapp amount of the cap is calculated as 7.5 per cent of the total recognised cost. This percentage, called the relevant percentage, represents a proxy for the average costs met by the asset holders. It has initially been computed by reference to:

• An average 25 year depreciation rate (4 per cent).
• An average amount of debt financing, estimated at an interest rate of 5 per cent on a debt equity ratio of 1:1 (2.5 per cent).
• An additional 1 per cent to recognise additional administration/revenue costs and the possibility of some fluctuation around the average.

»Ê¹ÚÌåÓýapp Treasury has the power to make regulations amending the relevant percentage (CTA2010\S356NA(1)) or which make other provisions (CTA2010\S356NA (2)). As at 30 May 2019 no regulations have been made.