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HMRC internal manual

Business Income Manual

Private Finance Initiative (PFI): third party revenue

A private sector operator in a PFI arrangement, whose trade includes the provision of design and construction services, may be granted an interest in part of the land (normally a lease or licence to occupy).

The intention may be to provide on site office or storage accommodation for the operator’s trade. Alternatively, the intention may be to operate an ancillary trade, e.g. a coffee shop in a hospital, or to derive sums from exploiting that interest, e.g. by letting retail outlets to third parties. Normally the scale of these activities is small in relation to the overall trading activities and, provided the operator is not the main occupier of the property, this will not be relevant when considering the scope of the operator’s trade (see BIM64025 onwards).

Similarly, an operator providing the property as part of a property business (see BIM64020) may retain part of the property for the same reasons.

Income from ancillary trading operations is chargeable to tax as trading income; ancillary rental income is chargeable to tax as property income.