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HMRC internal manual

Business Income Manual

Private Finance Initiative (PFI): contribution of land: chargeable gains consequences

S38, S50 Taxation of Chargeable Gains Act 1992

Where a private sector operator receives money’s worth, e.g. land, or money as a capital contribution towards the construction costs of a fixed capital asset of its business, the base cost of the PFI property, for the purposes of tax on chargeable gains, is reduced by the value of the asset contributed (see BIM64190). The operator has not incurred the expenditure for the purposes of the chargeable gains legislation (see CG15150 onwards).

In many cases, the contribution of money’s worth is made by a government, public or local authority and the legislation specifically requires a reduction in the base cost of the asset in such circumstances (see CG15288).

Where the land contributed is acquired as an investment its base cost for capital gains purposes is the price agreed between the parties, provided it is a commercial transaction (see BIM64190). Any increase or decrease in value, on its eventual disposal, will result in a chargeable gain or allowable loss.