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HMRC internal manual

Business Income Manual

Private Finance Initiative (PFI): contribution of land: value of asset

Where the contribution is an income receipt of the private sector operator’s business, i.e. a payment or prepayment of the unitary charge (the annual service payment), the value of the land received is brought in for trading income tax purposes.

As Viscount Simon noted, in Gold Coast Selection Trust Ltd v Humphrey [1948] 30TC209, at page 240:

‘In my view the principle to be applied is the following. In cases such as this, when a trader in the course of his trade receives a new and valuable asset, not being money, as the result of sale or exchange, that asset, for the purpose of computing the annual profits or gains arising or accruing to him from his trade, should be valued as at the end of the accounting period in which it was received, even though it is neither realised nor realisable till later.’

Provided it is a commercial transaction, we accept the price agreed between the parties and specified in the documentation as the value of the asset contributed for the purposes of Corporation Tax on income and chargeable gains (see BIM64200).

For transactions entered into on or after 16 March 2016, Section 49A CTA 2009 applies to bring into account an amount representing the money’s worth of the land, if, had the transaction involved money, an amount would have been brought into account.