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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Private Finance Initiative (PFI): group relief: trading company

S185 Corporation Tax Act 2010

Where the private sector operator in a PFI project has an interest in land and grants a right of occupation to the public sector purchaser, it is a question of fact whether the support services also provided constitute a separate trade.

If the operator is carrying on a trade, it is a trading company for the purposes of consortium relief provided that trade is its sole or main activity.

The mere fact that the property business element of a unitary charge (the annual service payment) constitutes a significant proportion, or even exceeds 50%, of the total gross income is only one of many factors to consider. Other factors, e.g. the use of management time, capital employed and the number of personnel engaged in the trading activities, may be of equal or greater relevance.

The test is whether, as a matter of fact, and taking into account all of the surrounding circumstances, the main activity of the company is trading. If its main activity is the provision of services, and the provision of accommodation (and the generation of rental income) is ancillary to that, then the company is a trading company.