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The Local Authorities (Capital Finance) Regulations 1997

Type Statutory-Instrument

Publication 1997-02-12

State In force

Department Queen's Printer of Acts of Parliament

Source legislation.gov.uk

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Made: 12th February 1997

Laid before Parliament: 24th February 1997

Coming into force

The Secretary of State for the Environment, as respects England, and the Secretary of State for Wales, as respects Wales, in exercise of the powers conferred on them by sections 40(5), 42(4), 48(1)(c) and (5), 49(3), 51(7), 57(1)(c), 58(4)(b) and (9), 59(3) to (5), 61(4), 64(2) and (5), 66(1)(a) and (6), 190(1) and 191(1) of, and paragraphs 10, 11(2), 15(1)(a), 17, 18(1) and 20 of Schedule 3 to, the Local Government and Housing Act 1989[^f00001], and of all other powers enabling them in that behalf, hereby make the following Regulations:

PART I — GENERAL

Citation, commencement and interpretation

1

(1) These Regulations may be cited as the Local Authorities (Capital Finance) Regulations 1997 and shall come into force—

(a) for the purposes of regulations 120, 121 and 162(a), on 30th March 1997; and

(b) for all other purposes, on 1st April 1997.

(2) In these Regulations except where the context otherwise requires—

“the Act” means the Local Government and Housing Act 1989, and any reference in these Regulations to a section is a reference to a section of the Act; and

“the 1990 Regulations” means the Local Authorities (Capital Finance) Regulations 1990[^f00002].

PART II — EXPENDITURE FOR CAPITAL PURPOSES

Expenditure to be expenditure for capital purposes

Issue of loan instruments

2

Expenditure of a local authority which is incidental to the issue of a loan instrument shall be expenditure for capital purposes unless all of the payments or repayments required to be made by the authority in respect of the loan instrument are required to be made not later than one year after the loan instrument is issued.

Building works

3

Expenditure incurred by a local authority on the carrying out of works which are intended to—

(a) increase substantially the thermal insulation of a building or part of a building,

(b) increase substantially the extent to which a building or part of a building can or will be used by a person aged 60 or over or a person who is a disabled person within the meaning given to that expression in section 114(6) (approval of applications to provide certain facilities for the disabled), or

in so far as it is not expenditure for capital purposes by virtue of section 40(2) (capital purposes), shall be expenditure for capital purposes if it may be so regarded in accordance with proper practices.

Advances and grants for building works

4

(1) In this regulation, “relevant expenditure” means expenditure incurred by a local authority on the making of advances, grants or other financial assistance to any person towards exenditure incurred or to be incurred by that person on—

(a) the carrying out of works such as are mentioned in regulation 3; or

(b) the carrying out of works which are intended to increase substantially the extent to which a building or part of a building can or will be used for any purpose.

(2) Relevant exenditure incurred by a local authority, in so far as it is not expenditure for capital purposes by virtue of section 40(4), and is not expenditure on approved investments, shall be expenditure for capital purposes.

Repayment of grants by local authority

5

Where a local authority are required to repay or make a payment in respect of any grant or other financial assistance made or given to them by a Minister of the Crown or Community institution towards expenditure for capital purposes, the expenditure incurred by the authority on making that repayment or payment shall be expenditure for capital purposes.

Housing disposal costs

6

Where an amount in respect of interest is included in any instalment of a disposal cost payable by a local authority in accordance with regulation 3 of the Housing (Change of Landlord) (Payment of Disposal Cost by Instalments) Regulations 1990[^f00003], the expenditure incurred by the authority on paying that interest shall be expenditure for capital purposes.

Computer programs

7

Expenditure incurred by a local authority on the acquisition or preparation of a computer program, including expenditure on the acquisition of a right to use the program, in so far as it is not expenditure for capital purposes by virtue of section 40(2), shall be expenditure for capital purposes if the authority acquire or prepare the program for use for a period of at least one year for any purpose relevant to their functions.

Expenditure under private finance transactions

8

(1) In this regulation, “private finance transaction” has the same meaning as in Part IV of these Regulations.

(2) Expenditure incurred by a local authority under a private finance transaction, in so far as it is not expenditure for capital purposes by virtue of section 40(2), shall be expenditure for capital purposes.

Expenditure not to be expenditure for capital purposes

Financial assistance for officers

9

Expenditure incurred by a local authority on the making of advances, grants or other financial assistance—

(a) to an officer of the authority pursuant to the terms and conditions of his employment, or

(b) in connection with the appointment of a person as an officer of the authority, to that person,

in so far as, apart from this regulation, it would be expenditure for capital purposes by virtue of section 40(4), shall not be expenditure for capital purposes.

Expenditure on certain investments

10

(1) In this regulation, “relevant amount” means any amount which—

(a) is due to a local authority under an investment which is, or was at the time it was made, an approved investment under regulation 2(b) or (c) of the Local Authorities (Capital Finance) (Approved Investments) Regulations 1990[^f00004];

(b) has become payable by the institution or building society with whom the investment was made (“the relevant body”) before the date on which the authority are entitled under the terms of the investment to require it to be repaid or redeemed; and

(c) has become payable by reason of a default or breach of covenant on the part of the relevant body in relation to the payment of the principal sum invested or interest.

(2) Expenditure to which paragraph (3) applies, in so far as, apart from this regulation, it would be expenditure for capital purposes by virtue of section 40(4), shall not be expenditure for capital purposes.

(3) This paragraph applies to expenditure incurred by a local authority on the making of an investment where—

(a) a relevant amount has been paid to the authority;

(b) the authority apply the relevant amount to meet the expenditure; and

(c) the investment consists of a deposit made with, or any security or other instrument issued by, the institution or building society which has become liable to pay the relevant amount.

PART III — CHARGE OF EXPENDITURE TO REVENUE ACCOUNTS

Expenditure required to be charged to a revenue account

11

Expenditure in respect of which a local authority have made a determination under section 42(2)(g) (expenditure which the authority determine is, or is to be, reimbursed) shall not be expenditure falling within section 42(2) where—

(a) the expenditure is, or is to be, met out of a contribution made, or to be made, under section 516(1) of the Housing Act 1985[^f00005]; and

(b) the contribution is, or is to be, paid by way of commuted payments within the meaning given to that expression in section 157 (commutation of, and interest on, periodic payments of grants etc.).

Expenditure not required to be charged to a revenue account

12

(1) Expenditure to which regulation 10 applies shall be expenditure falling within section 42(2).

(2) The following expenditure shall be expenditure falling within section 42(2), namely expenditure incurred by a local authority which—

(a) is met by the application under regulation 155, 156 or 157 of an amount for the time being set aside by the authority (whether voluntarily or pursuant to a requirement under Part IV of the Act) as provision to meet credit liabilities;

(b) consists of the transfer of such an amount to any of the bodies specified in regulation 158; or

(c) consists of the application of such an amount to meet any liability of the authority in respect of any levy payable under section 136 of the Leasehold Reform, Housing and Urban Development Act 1993[^f00006] (levy on disposals of dwelling-houses).

PART IV — CREDIT ARRANGEMENTS

Preliminary Provisions

Interpretation

13

(1) In this Part—

“the authority”— in relation to a lease, means the local authority who become the lessees under the lease; in relation to a contract, credit arrangement or transaction, means the local authority who enter into the contract, the arrangement or the transaction; and in relation to the variation of a credit arrangement, means the local authority who agree to the variation;

“housing land” means any land, houses or other property which, if acquired by a local authority, would be land to which section 74(1) (duty to keep Housing Revenue Account) would apply;

“new town corporation” has the same meaning as in section 172 (transfer of new town housing stock);

“non-housing land” means any land other than housing land;

“relevant value”, in relation to the land of which a local authority are to become the lessees, means the value of the lessor’s interest in the land as estimated by the authority before they become the lessees— on the assumption that they will become lessees under the lease, and according to the statement of practice on the valuation of property contained in the Appraisal and Valuation Manual published in September 1995 by the Royal Institution of Chartered Surveyors under ISBN number 0 85406 699 3[^f00007]; and

“term”, in relation to a lease acquired by a local authority, means— where the lease is granted to the authority, the period of the lease; and where the lease is acquired by the authority otherwise than by a grant, the period of the lease which is unexpired on the date on which the authority become the lessees.

(2) For the purposes of this Part, any reference to a contract is a reference to a single contract or, where two or more contracts taken together constitute a credit arrangement, a reference to those contracts taken together.

Capital cost of leases

14

(1) In this Part, subject to regulation 15, a reference to the capital cost of a lease is a reference to the amount which, at the time the authority become the lessees, the authority estimate will be the aggregate of—

(a) the value of the consideration given, or failing to be given, by them in respect of the lease before or during the financial year in which they become the lessees; and

(b) the value of the consideration falling to be given by them in respect of the lease in any subsequent financial year.

(2) For each subsequent financial year referred to in paragraph (1)(b), the value of the consideration falling to be given in that year shall be determined by the formula—

$$x{1+r100}n$ where— “x” is the value of the consideration which the authority estimate will fall to be given by them in respect of the lease in that financial year; “r” is the percentage rate of discount prescribed for the financial year in which the authority became the lessees by regulations made by the Secretary of State for the purposes of section 49 (initial and subsequent cost of credit arrangements); and “n” is the financial year concerned expressed as a year subsequent to the financial year in which the authority became the lessees (so that the first of the subsequent financial years is 1, the next financial year is 2, and so on).$

(3) For the purposes of this regulation and the following provisions of this Part, in any case where the consideration in respect of a lease consists, in whole or in part of—

(a) an undertaking to do or refrain from doing something at a future time (whether specified or not), or

(b) a right to do or refrain from doing something at a future time,

that consideration shall not be regarded as having been given until the undertaking is performed or, as the case may be, the right is exercised.

Consideration to be disregarded

15

(1) In determining—

(a) the capital cost of a lease for the purposes of regulation 35 or 36,

(b) the adjusted cost of a lease, or

a local authority shall disregard any consideration given or falling to be given in respect of the lease or, as the case may be, the earlier leasehold interest (“the lease”) if it is consideration to which paragraph (2), (3) or (4) applies.

(2) This paragraph applies to any consideration given by the authority before they become the lessees under the lease.

(3) This paragraph applies to any consideration where—

(a) the lease is excluded for the purposes of paragraph 11(2) of Schedule 3 to the Act by virtue of regulation 122 or 123; and

(b) the consideration falls to be given by the authority during the period of three months beginning on the date on which the authority become the lessees under the lease.

(4) This paragraph applies to any consideration in money paid out of a grant made under—

(a) section 3 of the Civil Defence Act 1948[^f00008];

(b) sections 46, 47 and 48 of the Police Act 1996[^f00009] (police grant and grants for capital expenditure and expenditure on safeguarding national security);

(d) section 63(6) of the Rent Act 1977[^f00011] (schemes for appointment of rent officers); or

(e) section 59 of the Justices of the Peace Act 1979[^f00012].

Meaning of private finance transaction

16

(1) In this regulation, “relevant asset” means any non-housing land or any other asset (including works) which is not land.

(2) For the purposes of this Part, a transaction is a private finance transaction if—

(a) the consideration received by the authority under the transaction includes the provision—

(i) of a relevant asset for use for, or in connection with, the exercise of a function of the authority (“the relevant purpose”); and

(ii) of services in relation to the use of the asset for the relevant purpose;

(b) the authority do not give to any person any undertaking or guarantee in respect of any obligations or liabilities of the person with whom they enter into the transaction (whether incurred under the transaction or otherwise);

(c) the consideration given by the authority under the transaction includes the payment of fees by instalments at annual or more frequent intervals;

(d) the fees are determined in accordance with provisions relating to—

(i) standards attained in the performance of the services; or

(ii) the extent, rate or intensity of use of the asset for the relevant purpose;

(e) the first instalment of fees falls to be paid after the authority have begun to use the asset for the relevant purpose; and

(f) the terms agreed for the transaction do not provide for any variation in the amount of fees payable, other than variation under the provisions mentioned in sub-paragraph (d), and any provision agreed for increasing the fees by reference to—

(i) increases in heating costs attributable to increases in the price of gas, electricity or fuel; or

(ii) the figure in Table 2.1 of Economic Trends[^f00013] published by the Office for National Statistics as the most recent percentage change, quarter on corresponding quarter of previous year, of the implied gross domestic product deflator at market prices.

Transactions which are credit arrangements

Private finance transactions

17

A private finance transaction which, apart from this regulation, would not be a credit arrangement is prescribed for the purposes of section 48(1)(c).

Leases and contracts which are not credit arrangements

Leases and contracts of small value

18

(1) A lease or a contract is excluded from section 48 if the authority estimate, at the time they become the lessees or enter into the contract, that the total value of the consideration which will fall to be given by them in respect of—

(a) the lease or the contract; or

(b) the lease or the contract taken together with any other arrangement (whether a lease or a contract) which they have entered into with the same person, or an associate of his, in the same financial year,

will not exceed £12,000.

(2) For the purposes of paragraph (1)—

(a) a local authority shall be deemed to have entered into another arrangement with the same person, or an associate of his, if they have acquired a lease under which that person or associate is the lessor; and

(b) two persons are associates of each other if, for the purposes of the Companies Act 1985[^f00014], one of them is a subsidiary of the other, or they are both subsidiaries of some other person.

Leases under which the consideration given mostly in first year

19

A lease is excluded from section 48 (credit arrangements) if, on the date on which the authority become the lessees, the authority estimate that the value of the consideration which will have been given by them in respect of the lease at the end of a period of one year comencing on that date, is not less than 90 per cent. of the capital cost of the lease.

Operating leases

20

(1) In this regulation—

(a) “operating lease” means a lease by a local authority of any vehicle, vessel, plant, machinery or apparatus; and

(b) in relation to an operating lease—

(i) “arrangement” means any arrangement (whether or not a credit arrangement) which is entered into in connection with the lease;

(ii) “the asset” means the asset which is acquired by the authority under the lease; and

(iii) “the commencement date” means the date on which the authority become the lessees under the lease, or, if earlier, the date on which the arrangement is made.

(2) An operating lease and an arrangement, if it is a credit arrangement, are excluded from section 48 if the termination value of the asset is not less than 10 per cent. of its value on the commencement date, and the lease, or the lease and the arrangement, does not provide, or do not together provide, for—

(a) the transfer of the property in the asset to the authority;

(b) the renewal or continuation of the lease or the arrangement on terms which provide for a transfer of the property in the asset to the authority;

(c) the renewal or continuation of the lease or the arrangement for any period for a consideration which is materially less than the amount that would reasonably be regarded, on the commencement date, as the open market rent for that period; or

(d) the receipt by the authority of any consideration which is equivalent, or determined by reference, to the value of the asset when the lease expires, the arrangement terminates or the period of any renewal or continuation of the lease or the arrangement terminates.

(3) For the purposes of paragraph (2), the termination value of the asset is the amount which, on the commencement date, the authority estimate will be the value of the asset

(a) when the lease expires, or the arrangement terminates; or

(b) where the authority have a right to renew or continue the lease or the arrangement, on the latest date on which the lease or arrangement could expire or terminate if the authority exercised that right.

Contracts with residuary bodies

21

(1) In this regulation, “residuary body” means—

(a) the Local Government Residuary Body (England)[^f00015]; or

(b) the Residuary Body for Wales or Corff Gweddilliol Cymru[^f00016].

(2) A contract between a local authority and a residuary body is excluded from section 48 if it provides for a transfer of land to the authority.

Licensing contracts

22

(1) In this regulation—

“dwelling” means any building or part of a building which is occupied as a dwelling, or is a hostel providing accommodation for persons who, for the purposes of Part VII of the Housing Act 1996 (homelessness)[^f00017], are homeless, or persons who have a special need for accommodation arising from physical or mental disability, age, infirmity or other special social disability or disadvantage;

“long lease” means a lease which is a long tenancy for the purposes of Part IV of the Housing Act 1985 (secure tenancies and rights of secure tenants)[^f00018];

“shared ownership lease” means a lease of a dwelling granted on payment of a premium which is calculated by reference to a percentage of the value of the dwelling or of the cost of providing it, and is not less than 25 per cent. of that value or cost; and

“public body” means a local authority, a new town corporation or an urban development corporation established under Part XVI of the Local Government, Planning and Land Act 1980 (urban development)[^f00019].

(2) A contract to which paragraph (3) applies is excluded from section 48.

(3) This paragraph applies to a contract which provides—

(a) for the construction or enhancement of a dwelling, or the provision of a dwelling by the conversion of a building or part of a building, for the authority on land in which the authority have a freehold or leasehold interest; and

(b) that the authority are required, after the carrying out of the works, to grant a shared ownership lease of the dwelling or to dispose of the freehold or grant a long lease of the dwelling to any person other than a public body or a company which is a regulated company within the meaning given to that expression in article 1(4) of the Local Authorities (Companies) Order 1995[^f00020].

Investments made for the purposes of a superannuation fund

23

A lease or a contract is excluded from section 48 if the authority become lessees under the lease or enter into the contract as an investment for the purposes of a superannuation fund which the authority are required to keep by virtue of the Superannuation Act 1972[^f00021].

Other leases excluded from section 48

24

(1) A lease of any property is excluded from section 48 if it is—

(a) assigned to the authority by a new town corporation; or

(b) granted to the authority in accordance with regulations made under section 100 of the Housing Act 1988 (tenants continuing as tenants of public sector landlord)[^f00022].

(2) A lease of any property is excluded from section 48 if a local authority become the lessees by virtue of—

(a) the Local Government Changes for England (Property Transfer and Transitional Payments) Regulations 1995[^f00023];

(b) article 9 of the Police and Magistrates' Courts Act 1994 (Commencement No. 5 and Transitional Provisions) Order 1994[^f00024];

(d) the Local Government Reorganisation (Wales) (Property etc.) Order 1996[^f00026]; or

(e) article 15 of the National Park Authorities (England) Order 1996[^f00027], or an agreement under section 76 of the Environment Act 1995 (agreements as to incidental matters)[^f00028] or an award under subsection (3) of that section.

Other contracts excluded from section 48

25

(1) A contract to which paragraph (2) applies is excluded from section 48.

(2) This paragraph applies to a contract which would not constitute a credit arrangement if the authority, in making the relevant estimates, disregarded an amount of consideration equal to three per cent. of the total value of the consideration falling to be given by them under the contract.

(3) In paragraph (2), “relevant estimates” means the estimates which the authority make under section 48(1)(b) for the financial years during which they are to receive any consideration under the contract and the financial year immediately following the last such year.

Initial and subsequent cost of leases

Exclusion of leases from section 49(2)

26

(1) Any credit arrangement which is a lease shall be excluded from section 49(2) (initial and subsequent cost of credit arrangements).

(2) In relation to a credit arrangement which is a lease, the initial cost and the cost of the arrangement at any time shall be calculated in accordance with regulations 27 to 39.

Leases of which the initial cost is nil

Cost of lease at any time

27

Subject to regulation 46, where, by virtue of this Part, the initial cost of a lease is nil, the cost of that lease at any time shall also be nil.

Leases under certain private finance transactions

28

The initial cost of a lease of land shall be nil where the authority become the lessees under the provisions of a private finance transaction, and the initial cost of that transaction falls to be determined under regulation 40.

Lease of land for term not exceeding three years

29

The initial cost of a lease (“the new lease”) of land shall be nil where—

(a) the term of the new lease does not exceed three years;

(b) the authority have not, at any time within the period of five years ending on the date on which they become the lessees, had a freehold interest in any part of the land, or an earlier leasehold interest in any part of the land for a term which, added to the term of the new lease, produces a combined term of more than three years; and

(c) no other local authority have, within the same period, had a leasehold interest in any part of the land for a term which, added to the term of the new lease, produces a combined term of more than three years.

Lease of dwelling-house for use as accommodation for homeless persons

30

(1) In this regulation, “dwelling-house” has the same meaning as in Part IV of the Housing Act 1985 (secure tenancies and rights of secure tenants)[^f00029].

(2) The initial cost of a lease of a dwelling-house shall be nil where the term of the lease does not exceed ten years and the authority have decided, before they become the lessees under the lease, to use, or continue to use, the dwelling-house to provide accommodation in the exercise of their functions under Part VII of the Housing Act 1996 (homelessness)[^f00030].

Lease of land for non-housing purposes

31

(1) In this regulation—

“the demised land”, in relation to a new lease, means the land demised by the new lease; and

“new lease” means a lease of non-housing land— which is for a term not exceeding ten years; which does not confer on the lessee an option to purchase the lessor’s interest in the demised land; and of which the capital cost does not exceed 70 per cent. of the relevant value of the demised land.

(2) The initial cost of a new lease shall be nil where—

(a) the authority have not at any time had a freehold or any leasehold interest in the whole or any part of the demised land; and

(b) no other local authority have had a leasehold interest in the demised land under a lease of which the inital cost was nil.

(3) The initial cost of a new lease shall be nil where—

(a) the authority had a leasehold interest in the demised land under an earlier lease acquired before 1st April 1989; and

(b) the new lease is a lease of the same land granted to the authority upon the expiry date of the earlier lease.

(4) The initial cost of a new lease shall be nil where the authority have disposed of the freehold or a leasehold interest in any land, and—

(a) the new lease is a lease of the whole or any part of a new building constructed on that land after the date of that disposal; or

(b) the new lease is a lease of part of a building on that land which was occupied before the disposal for the purposes of, or in connection with, the exercise of any of the authority’s functions, and the capital cost of the new lease is less than 50 per cent. of the amount which would be the capital cost of a lease on identical terms of the whole building.

Consecutive leases of land for total term not exceeding ten years

32

The initial cost of a lease (“the new lease”) of land shall be nil where—

(a) the authority had an earlier leasehold interest (“the preceding interest”) in the land, and become the lessees upon the expiry of the preceding interest;

(b) the preceding interest was a lease of which the initial cost was nil by virtue of regulation 29 or regulation 7(3) of the 1990 Regulations[^f00031];

(c) the new lease is for a term which, added to the term of the preceding interest, produces a combined term of not more than ten years; and

(d) but for the preceding interest, the initial cost of the new lease would be nil by virtue of regulation 31.

Fire authority leases

33

(1) In this regulation—

(a) “new fire authority” means a fire authority constituted by a combination scheme under the Fire Services Act 1947[^f00032] made in consequence of an order under Part II of the Local Government Act 1992 (local government changes for England)[^f00033] containing provision for giving effect to a structural change (within the meaning given to that expression in section 14 of that Act), or in consequence of the provisions of the Local Government (Wales) Act 1994[^f00034]; and

(b) in relation to a new fire authority—

(i) “old fire authority” means a county council which is superseded as a fire authority by the new fire authority; and

(ii) “relevant date” means the date on which the combination scheme which constitutes the new fire authority is brought into full operation.

(2) The initial cost of a lease (“the new lease”) of land shall be nil where—

(a) the authority are a new fire authority;

(b) the old fire authority occupied the land on the day before the relevant date, and the authority become the lessees within a period of 12 months beginning on the relevant date;

(c) immediately before the date on which the authority become the lessees, another local authority have a freehold or leasehold interest in the land;

(d) the term of the new lease does not exceed ten years;

(e) the new lease does not confer on the lessee an option to purchase the lessor’s interest in the land; and

(f) where the term of the new lease exceeds three years, the capital cost of the new lease does not exceed 70 per cent. of the relevant value.

(3) The initial cost of a lease (“the new lease”) of land shall be nil where—

(a) the authority are the old fire authority in relation to a new fire authority, and become the lessees of the new fire authority within a period of 12 months beginning on the relevant date;

(b) immediately before the relevant date, the authority had a freehold or earlier leasehold interest in the land which has been transferred to the new fire authority under the provisions of the combination scheme which constituted the new fire authority;

(d) the new lease does not confer on the lessee an option to purchase the lessor’s interest in the land; and

(e) where the term of the new lease exceeds three years, the capital cost of the new lease does not exceed 70 per cent. of the relevant value.

National Park authority leases

34

(1) In this regulation—

“National Park authority” has the same meaning as in article 2 of the National Park Authorities (England) Order 1996[^f00035];

“relevant agreement or award” means an agreement under section 76 of the Environment Act 1995 (agreements as to incidental matters)[^f00036] or an award under subsection (3) of that section; and

“relevant council”, in relation to a National Park authority, means the council which, pursuant to paragraph 8 of Schedule 17 to the Local Government Act 1972, appointed the National Park Committee for the Park for which the authority is established.

(2) The initial cost of a lease of land shall be nil where—

(a) the authority are a National Park authority;

(b) the relevant council occupied the land on 31st March 1997, and the authority become the lessees within a period of 12 months beginning on 1st April 1997 other than by virtue of a relevant agreement or award;

(c) immediately before the date on which the authority become the lessees, another local authority have a freehold or leasehold interest in the land;

(d) the term of the lease does not exceed ten years;

(e) the lease does not confer on the lessee an option to purchase the lessor’s interest in the land; and

(f) where the term of the lease exceeds three years, the capital cost of the new lease does not exceed 70 per cent of the relevant value.

(3) The initial cost of a lease (“the new lease”) of land shall be nil where—

(a) the authority are the relevant council in relation to a National Park authority, and become the lessees of the National Park authority within a period of 12 months beginning on 1st April 1997;

(b) on 31st March 1997 the authority had a freehold or earlier leasehold interest in the land which has vested in the National Park authority by virtue of article 15 of the National Park Authorities (England) Order 1996 or a relevant agreement or award;

(d) the new lease does not confer on the lessee an option to purchase the lessor’s interest in the land; and

(e) where the term of the new lease exceeds three years, the capital cost of the new lease does not exceed 70 per cent. of the relevant value.

Other leases

Leases having an initial cost which includes consideration under earlier lease

35

(1) In this regulation—

“dwelling-house” has the same meaning as in Part IV of the Housing Act 1985 (secure tennancies and rights of secure tenants);

“excluded tenancy” means a tenancy or licence to occupy a dwelling-house which, for the purposes of Part IV of the Housing Act 1985, was excluded from being a secure tenancy by virtue of paragraph 4 (accommodation for homeless persons)[^f00037] or paragraph 6 (short-term arrangements) of Schedule 1 to that Act; and

“relevant lease” means any lease of land other than a lease of a dwelling-house which— was, at any time after 31st March 1990 and before 1st April 1997, let or occupied under an excluded tenancy; or has, at any time after 31st March 1997, been used by the authority or any other local authority to provide accommodation in the exercise of their functions under Part VII of the Housing Act 1996 (homelessness).

(2) Subject to regulations 37 and 38, where in relation to a relevant lease of land—

(a) the initial cost does not fall to be determined under any of regulations 28 to 34,

(b) the authority had an earlier leasehold interest (“the preceding interest”) in the whole or part of the land, and

(c) the authority acquired the preceding interest on or after 1st April 1990 under a lease of which the initial cost was nil by virtue of these Regulations or the 1990 Regulations[^f00038],

the initial cost shall be the aggregate of the capital cost of the relevant lease and the value of the consideration given by the authority in respect of the preceding interest.

Leases of other descriptions

36

(1) Subject to regulations 37 and 38, where the initial cost of a lease of land does not fall to be determined under any of regulations 28 to 35, the initial cost of the lease shall be the capital cost of the lease.

(2) The initial cost of a lease of goods shall be the capital cost of the lease.

Leases under private finance transactions—leases not falling with regulation 28

37

(1) Where, in relation to a lease of land, the authority become the lessees under the provisions of a private finance transaction, and the initial cost of that transaction falls to be determined under regulation 41, the initial cost (if it is not nil by virtue of any other provision of this Part) shall be lesser of—

(a) 70 per cent. of the amount which, apart from this regulation, would be the initial cost of the lease; and

(b) the amount which, apart from this regulation, would be the initial cost of the lease minus the relevant deduction.

(2) For the purposes of paragraph (1)(b), the relevant deduction is the amount, if any, by which amount A exceeds amount B where—

“amount A” means the amount of the relevant deduction determined under regulation 41(5) for the private finance transaction in question; and

“amount B” means the amount which, apart from regulation 41, would be the initial cost of that transaction.

(3) Where, in relation to a lease of land, the authority become the lessees under the provisions of a private finance transaction, and the initial cost of that transaction falls to be determined under regulation 42, the initial cost (if it is not nil by virtue of any other provision of this Part) shall be 70 per cent. of the amount which, apart from this regulation, would be the initial cost of the lease.

Reduction in the initial cost of certain leases

38

(1) For the purposes of this regulation—

(a) a lease is a relevant lease if it is a lease of land and its initial cost falls to be determined under regulation 35, 36 or 37;

(b) “old lease” means a lease of which the initial cost fell to be determined under regulation 35, 36 or 37 or paragraph (6) or (7) of regulation 7, or regulation 7A, of the 1990 Regulations[^f00039]; and

(c) “relevant time”, in relation to an old lease, means the time when the authority’s interest in the lease ceases other than by reason of the expiry of the term of the lease.

(2) A local authority who become the lessees under a relevant lease may reduce the amount which, apart from this regulation, would be the initial cost of that lease by an amount not exceeding the balance of the released credit cover in relation to an old lease.

(3) In paragraph (2), the balance of the released credit cover in relation to an old lease is an amount determined by the authority by—

(a) estimating, at the relevant time and on the assumptions specified in paragraph (4), the initial cost of a new lease of the land demised by the old lease; and

(b) subtracting from that estimate any amount which the authority have already applied out of that estimate in reduction under paragraph (2) of the initial cost of a lease other than the relevant lease concerned.

(4) The assumptions specified for the purposes of paragraph (3) are—

(a) that the term of the new lease was equal to the term of the old lease less the expired portion of that term;

(b) that the initial cost of the new lease would fall to be determined under regulation 36;

(d) that the initial cost of the new lease fell to be calculated at the time when the initial cost of the old lease was calculated.

Cost at any time of certain leases

39

Where a local authority become the lessees under a lease of which the initial cost falls to be determined under regulation 35, 36 or 37, the cost of the lease at any time shall be the amount which would be the capital cost of the lease, if it was entered into at the time in question, on the basis of an estimate made at that time and disregarding any consideration given by the authority in respect of the lease before that time.

Private finance transactions

Transactions for the provision of a capital asset and services

40

(1) In this regulation, in relation to a private finance transaction—

“asset” means the asset provided under the transaction; and

“relevant purpose” means the purpose for which the asset is provided under the transaction.

(2) A credit arrangement which is a private finance transaction shall be excluded from section 49(2), and the initial cost and the cost at any time of the arrangement shall be nil, if—

(a) the services provided in relation to the asset consist of, or include, maintaining and repairing the asset and doing everything necessary to ensure that the asset can be used for the relevant purpose in safety and comfort and in accordance with any requirements specified by the authority; and

(b) the authority determine, immediately before the date on which they enter into the transaction, that their estimate of amount B does not exceed 80 per cent. of their estimate of amount A.

(3) For the purposes of paragraph (2), in relation to a private finance transaction—

“amount A” means the amount which, apart from this regulation, would be the initial cost of the transaction; and

“amount B” is the amount which would be amount A if for each relevant financial year (within the meaning given to that expression in section 48(2)) the authority assumed— that the amount of fees falling to be paid under the transaction would be the minimum which could become payable in that year (without there being a breach of any term of the transaction); and that the minimum extent, rate or intensity of use of the asset for the relevant purpose would be 80 per cent. of the extent, rate or intensity of use estimated by them for that year for the purpose of estimating amount A.

Transactions for the replacement or enhancement of a building and provision of heating services

41

(1) In this regulation, in relation to a private finance transaction to which paragraph (3) applies (a “relevant transaction”)—

“corresponding purpose”, in relation to any qualifying purpose, means the same qualifying purpose, or a different purpose within the same category as that which includes the same qualifying purpose;

“old building” means the relevant building in respect of which the authority make a decision such as is mentioned in paragraph (3)(b); and “new building” means the building which, in consequence of such a decision, the authority use for a corresponding purpose;

“qualifying purpose”, in relation to the use of land, means a purpose specified in any of the categories 1 to 6 and 8 and 9 of Schedule 1 to these Regulations, and “category” means one of those categories; and

“relevant building” means a building— which is situated on non-housing land; which is in use by the authority for a qualifying purpose; and in which the authority have a freehold interest or a leasehold interest under a lease granted for a term of not less than 99 years.

(2) A credit arrangement which is a relevant transaction shall be excluded from section 49(2), and the initial cost and the cost at any time of the transaction shall be calculated in accordance with paragraphs (4) to (7).

(3) This paragraph applies to a private finance transaction where—

(a) the initial cost of the transaction does not fall to be determined under regulation 40;

(b) at any time during the period of five years ending on the date on which they enter into the transaction, the authority made a single decision either—

(i) to cease to use a relevant building and to use a different building for a corresponding purpose; or

(ii) to carry out works for the enhancement of a relevant building and to continue to use the same building, after the completion of the works, for a corresponding purpose;

(c) the asset provided for the authority’s use under the transaction consists of, or includes, the new building or, as the case may be, the works of enhancement of the relevant building; and

(d) the services provided in relation to the asset consist of, or include, maintaining and repairing the system for heating the new building and providing for the supply of the gas, electricity and fuel required for such heating.

(4) Subject to paragraph (7), the initial cost of a relevant transaction shall be the lesser of—

(a) 70 per cent. of the amount which, apart from this regulation, would be the initial cost of the transaction; and

(b) the amount which, apart from this regulation, would be the initial cost of the transaction minus the relevant deduction.

(5) For the purposes of paragraph (4)(b), the relevant deduction is the amount which would be the initial cost of the transaction assuming that—

(a) the initial cost fell to be determined in accordance with section 49(1) and (2);

(b) no consideration was required to be given in the financial year in which the transaction was entered into; and

(c) for each subsequent financial year of the transaction, for the purposes of the formula in section 49(2), “x” was an amount equal to the product of the formula—

$$E(1+i100)n$ where— “E” means the average annual expenditure which the authority incurred, during the period of 5 years ending on the date on which they enter into the transaction (or, if earlier, the date on which they cease to use the old building) in providing for the old building the same services as those to be provided under the transaction; “i” means the figure in Table 2.1 of Economic Trends published by the Office for National Statistics as the most recent percentage change, quarter on corresponding quarter of previous year, of the implied gross domestic product deflator at market prices; and “n” has the same meaning as in section 49(2).$

(6) Subject to paragraph (7), the cost at any time of a relevant transaction shall be the lesser of—

(a) 70 per cent. of the amount which, apart from this regulation, would be the cost of the transaction at that time; and

(b) the amount which, apart from this regulation, would be the cost of the transaction at that time minus an amount equal to the product of the formula—

$$D×YT$ where— “D” means the relevant deduction determined in relation to the transaction in accordance with paragraph (5); “T” means the number of years comprising the period over which consideration falls to be given by the authority under the transaction; and “Y” means the number of years which, at the time in question, comprises the unexpired part of that period.$

(7) For the purpose of calculating the initial cost or cost at any time of a relevant transaction, the authority shall disregard any consideration not in money which has been, or falls to be, given by them in respect of the transaction.

Transactions for the provision of a building and heating services

42

(1) In this regulation—

“qualifying purpose”, in relation to the use of land, means a purpose specified in any of the categories 1 to 6 and 8 and 9 of Schedule 1 to these Regulations, and “category” means one of those categories; and

“relevant transaction” means a private finance transaction to which paragraph (3) applies.

(2) A credit arrangement which is a relevant transaction shall be excluded from section 49(2), and the initial cost and the cost at any time of the transaction shall be calculated in accordance with paragraphs (4) to (6).

(3) This paragraph applies to a private finance transaction where—

(a) the initial cost of the transaction does not fall to be determined under regulation 40 or 41;

(b) the asset provided under the transaction consists of, or includes, a building which is on non-housing land and is for use for a qualifying purpose; and

(c) the services provided in relation to the asset consist of, or include, maintaining and repairing the system for heating the building and providing for the supply of the gas, electricity and fuel required for such heating.

(4) Subject to paragraph (6), the initial cost of a relevant transaction shall be 70 per cent. of the amount which, apart from this regulation, would be the initial cost of the arrangement.

(5) Subject to paragraph (6), the cost at any time of a relevant transaction shall be 70 per cent. of the amount which, apart from this regulation, would be the cost of the transaction at that time.

(6) For the purpose of calculating the initial cost or cost at any time of a relevant transaction, the authority shall disregard any consideration not in money which has been, or falls to be, given by them in respect of the transaction.

Initial and subsequent cost of other credit arrangements

Arrangement for improving the heating or lighting of a building

43

(1) An arrangement to which paragraph (2) applies shall be excluded from section 49(2), and the initial cost and the cost at any time of such an arrangement shall be calculated in accordance with regulation 45.

(2) This paragraph applies to a credit arrangement where—

(a) the arrangement is for the carrying out of works consisting of the improvement of the system for heating or lighting a building in which the authority have a freehold or leasehold interest, or the installation of a new system for such heating or lighting; and

(b) the person with whom the arrangement is made is required under the arrangement, or under a separate contract entered into no later than the date of the arrangement, to maintain and repair the system for heating, or, as the case may be, lighting the building concerned.

Arrangement for improving street lighting

44

(1) An arrangement to which paragraph (2) applies shall be excluded from section 49(2), and the initial cost and the cost at any time of such an arrangement shall be calculated in accordance with regulation 45.

(2) This paragraph applies to a credit arrangement where—

(a) the arrangement is for the carrying out of works which are intended to improve the system of lamps, lamp posts and other materials and apparatus which supplies the means of lighting streets, markets and public buildings in the area of the authority (“the lighting system”);

(b) the works consist of the installation of new lamps, lamp posts and other materials and apparatus;

(c) the person with whom the arrangement is made is required under the arrangement, or under a separate contract entered into no later than the date of the arrangement, to maintain and repair the lighting system in whole or in part; and

(d) the lighting system—

(i) was provided by the authority in the exercise of powers under section 161 of the Public Health Act 1875[^f00040] or section 97 of the Highways Act 1980 (lighting of highways)[^f00041]; or

(ii) has vested in the authority by virtue of section 270 of the Highways Act 1980 (transfer of lighting systems).

Initial cost and cost at any time of arrangements for heating or lighting improvements

45

(1) In this regulation, “relevant arrangement” means a credit arrangement to which regulation 43(2) or 44(2) applies.

(2) The initial cost of a relevant arrangement shall be the amount which, apart from this regulation, would be the initial cost of the arrangement minus the amount which would be the initial cost assuming that—

(a) no consideration was required to be given in respect of the arrangement in the financial year in which the arrangement comes into being; and

(b) for each subsequent financial year of the arrangement, for the purposes of the formula in section 49(2), “x” was an amount equal to the product of the formula—

$$A(1+i100)n$ where— “A” means the average annual expenditure incurred by the authority during the period of five years ending on the date on which they enter into the arrangement, on operating, maintaining and repairing the heating system or lighting system which is improved or replaced by the works carried out under the arrangement; “i” means the figure in Table 2.1 of Economic Trends published by the Office for National Statistics as the most recent percentage change, quarter on corresponding quarter of previous year, of the implied gross domestic product deflator at market prices; and “n” has the same meaning as in section 49(2).$

(3) The cost at any time of a relevant arrangement shall be the amount which, apart from this regulation, would be the cost of the arrangement at that time minus an amount equal to the product of the formula—

$$I×UP$ where— “I” means the amount which would be the initial cost of the arrangement calculated on the assumptions mentioned in paragraph (2); “P” means the number of years comprising the period over which the consideration on the part of the authority under the arrangement falls to be given; and “U” means the number of years which, at the time in question, comprises the unexpired part of that period.$

Variation of credit arrangements

Variation of arrangements excluded from section 49(2)

46

Where a credit arrangement which is excluded from section 49(2) is varied as mentioned in section 51(1) (variation of credit arrangements), the adjusted cost and the cost of the arrangement at any time after the variation shall be determined in accordance with regulations 47 to 51.

The adjusted cost of arrangements—general provision

47

(1) Subject to regulation 15, the adjusted cost of a credit arrangement which is excluded from section 49(2), other than a credit arrangement falling within regulation 48, 49 or 50, shall be the amount which, at the time the arrangement is varied, the authority estimate will be the aggregate of—

(a) the value of the consideration given by them in respect of the arrangement before or during the financial year in which the arrangement is varied; and

(b) the value of the consideration falling to be given by them in respect of the arrangement, as varied, in any subsequent financial year.

(2) For each subsequent financial year referred to in paragraph (1)(b), the value of the consideration falling to be given in that year shall be the amount determined by the formula in regulation 14(2), but, for this purpose—

“x” is the value of the consideration which the authority estimate will fall to be given by them in that financial year in respect of the arrangement as varied;

“r” is the percentage rate of discount prescribed for the financial year in which the arrangement is varied by regulations made by the Secretary of State for the purposes of section 49; and

“n” is the financial year concerned expressed as a year subsequent to the financial year in which the arrangement is varied (so that the first of the subsequent financial years is 1, the next is 2, and so on).

Leases having an adjusted cost of nil

48

Where—

(a) a credit arrangement which is a lease of land (“the arrangement”) is varied by the grant to the authority of a new lease of the same land for a term which extends beyond the expiry date of the arrangement, and

(b) if the new lease were granted upon the expiry of the arrangement, the initial cost of the new lease would fall to be determined under regulation 29, 30 or 32,

the adjusted cost of the arrangement shall be nil.

Variation of lease where initial cost included consideration under earlier lease

49

(1) In this regulation—

“preceding interest”, in relation to a relevant lease, means the earlier leasehold interest mentioned in regulation 35(2) or, as the case may be, paragraph (6)(b) of regulation 7 of the 1990 Regulations; and

“relevant lease” means a lease of which the initial cost was determined under regulation 35 or paragraph (6) of regulation 7 of the 1990 Regulations[^f00042].

(2) Where a local authority agree to a variation of a credit arrangement which is a relevant lease, the adjusted cost of the lease shall be the aggregate of—

(a) the amount which, apart from this regulation, would be the adjusted cost by virtue of regulation 47; and

(b) the value of the consideration given by the authority in respect of the preceding interest.

Continuation of tenancy under Part II of the Landlord and Tenant Act 1954

50

(1) In this regulation—

“the 1954 Act” means the Landlord and Tenant Act 1954[^f00043]; and

“relevant lease” means a lease which creates a tenancy to which Part II of the 1954 Act (security for business and professional tenants) applies.

(2) Where a credit arrangement which is a relevant lease is varied by the continuation of the tenancy by virtue of section 24 of the 1954 Act (continuation of tenancies to which Part II applies and grant of new tenancies), the adjusted cost of the lease shall be an amount determined for the lease under regulation 47, or, where the initial cost of the lease was determined under regulation 35 or paragraph (6) of regulation 7 of the 1990 Regulations, under regulation 49.

Cost of arrangements at any time after variation

51

Where a local authority agree to a variation of a credit arrangement which is excluded from section 49(2), the cost of the arrangement at any time after the variation shall be the amount which would, in accordance with regulation 47, be the adjusted cost of the arrangement if the variation was made at the time in question, on the basis of an estimate made at that time and disregarding any consideration given by the authority in respect of the arrangement before that time.

PART V — CREDIT APPROVALS

Interpretation

52

In this Part, “the 1996 Act” means the Housing Grants, Construction and Regeneration Act 1996[^f00044].

Specified capital grants—all local authorities

53

Contributions paid to a local authority under section 569(1) of the Housing Act 1985 (contributions towards expense of assisting owners of defective housing)[^f00045] are specified for the purposes of section 57, except to the extent that they are paid in annual sums payable for a period of ten years or more.

Specified capital grants—local authorities in England

54

(1) In this regulation, “relevant grant” means—

(a) a disabled facilities grant within the meaning given to that expression in section 101(2)(c) (grants for improvements and repairs)[^f00046]; or

(b) a grant available under section 1 of the 1996 Act (grants for improvements and repairs) towards the cost of works required for the provision of facilities for disabled persons in dwellings and in the common parts of buildings containing one or more flats.

(2) Contributions paid to a local authority in England are specified for the purposes of section 57 (effect of certain capital grants on credit approvals) if they are paid under section 132(1) or under section 92(1) of the 1996 Act towards expenditure incurred by the authority on making relevant grants.

Specified capital grants—local authorities in Wales

55

Contributions and subsidies paid to a local authority in Wales are specified for the purposes of section 57 if they are paid under—

(a) section 429(1) of the Housing Act 1985 (contributions to improvement for sale schemes);

(b) section 96(1) (contributions towards expenditure under Part VII of the Act (renewal areas));

(d) section 165(4) (slum clearance subsidy);

(e) section 92(1) of the 1996 Act; or

(f) section 139(1) of the 1996 Act (contributions towards expenditure on relocation grants).

PART VI — CAPITAL RECEIPTS

Sums to be capital receipts

Transfer of property under the London Government Act 1963

56

Where a sum in respect of principal is payable to a local authority by virtue of an order made under section 23(3) or 84 of the London Government Act 1963 (transfer of land held for housing purposes)[^f00047] in relation to any matter which has been transferred under the order from the authority to another body, the sum received by the authority shall be a capital receipt.

Transfer of property under the Local Government Act 1972

57

Where a sum in respect of principal is payable to a local authority by virtue of—

(a) an order under section 51(2), 58(2) or 67(4) of the Local Government Act 1972 (“the 1972 Act”)[^f00048], regulations under section 67(1) or (2) of the 1972 Act, or an agreement under section 68 of the 1972 Act in relation to any matter which has been transferred under the order, the regulations or, as the case may be, the agreement from the authority to another body; or

(b) an order under section 254(1) or (2)(a) or (d) of the 1972 Act, or under those provisions as extended by section 34(1) of, and paragraph 5(2)(b) of Schedule 6 to, the Water Act 1973[^f00049], in relation to any matter which has been transferred under the 1972 Act or the order from the authority to another body,

the sum received by the authority shall be a capital receipt.

Repayment of money deemed to have been borrowed

58

A sum received by a local authority in respect of a repayment of principal in relation to money which, by virtue of an order made under section 66(1) or 67(3) of the Local Government Act 1985 (discharge of residuary functions)[^f00050], is deemed to have been borrowed from them by another local authority shall be a capital receipt.

59

A sum received by a local authority in respect of an interim or final payment made in accordance with Schedule 6A to the Housing Act 1985 (redemption of landlord’s share)[^f00051], if it is not a capital receipt by virtue of section 58(1)(a) (capital receipts), shall be a capital receipt.

Disposal of premises transferred to grant-maintained school

60

(1) In this regulation, “grant-maintained school” has the same meaning as in section 183 of the Education Act 1996[^f00052].

(2) Where the governing body incorporated for the purpose of conducting a grant-maintained school are required by the Secretary of State under section 298(2)(b) of the Education Act 1996 to pay a sum to a local authority, the sum received by the authority shall be a capital receipt.

Sums not to be capital receipts

Capital receipts not exceeding £6,000

61

A sum received by a local authority which, apart from this regulation, would be a capital receipt by virtue of section 58(1)(a) shall not be a capital receipt if the aggregate of all sums received or to be received by the authority in respect of the disposal for which the sum is paid does not exceed £6,000.

Disposal of investments

62

A sum received by a local authority in respect of the disposal of an investment which, at the time of disposal, is not an approved investment shall not be a capital receipt if—

(a) by virtue of regulation 12(1), the expenditure incurred by the authority on making the investment was expenditure falling within section 42(2) (expenditure excluded from requirement to charge expenditure to revenue account); or

(b) the investment was an approved investment under regulation 2(b) or (c) of the Local Authorities (Capital Finance) (Approved Investments) Regulations 1990[^f00053] (“the 1990 Regulations”), and has ceased to be an approved investment because—

(i) where the deposit which constitutes the investment was made with an authorised institution, that institution has ceased to be an authorised institution within the meaning given to that expression in regulation 1(2) of the 1990 Regulations; or

(ii) where the deposit which constitutes the investment was made with a building society, that building society has ceased to be a building society within the meaning given to that expression in regulation 2(c) of the 1990 Regulations.

Repayment of grants

63

A sum received by a local authority which, apart from this regulation, would be a capital receipt by virtue of section 58(1)(c) shall not be a capital receipt if it is paid by a person other than the person to whom the authority gave the grant or other financial assistance in relation to which the sum is paid.

PART VII — RESERVED PART OF CAPITAL RECEIPTS

Preliminary provisions

Interpretation

64

In this Part—

“nil per cent. receipt” means a capital receipt of which the reserved part is nil per cent. by virtue of regulation 65;

“the authority”, in relation to a capital receipt, means the local authority by whom the receipt is received; and

“reserved part”, in relation to a capital receipt received by a local authority, means the amount or the percentage of the receipt which is the reserved part of the receipt for the purposes of section 59 (the reserved part of capital receipts).

Capital receipts of debt-free authorities

65

(1) In this regulation—

“disregarded borrowing” means— borrowing which is short-term borrowing for the purposes of section 45(1)(b) (the authority’s own borrowing limits); borrowing undertaken under section 5 of the City of London (Various Powers) Act 1924[^f00054]; or borrowing undertaken before 24th August 1995, other than borrowing by the issue of stock on or after 15th December 1993, from a person who is not a relevent lender; and

“relevant lender” means— the Public Works Loan Board; the Bank of England; the European Investment Bank; a body mentioned in any of paragraphs 1 to 17, or in paragraph 28, 29 or 30, of Part II of the Schedule to the Local Authorities (Capital Finance) (Approved Investments) Regulations 1990; an authorised institution (within the meaning which that expression has in the Banking Act 1987 [^f00055]; or a building society (within the meaning given to that expression in the Building Societies Act 1986 [^f00056]).

(2) The reserved part of a capital receipt shall be nil per cent. where—

(a) at the beginning of the financial year in which the receipt is received, the credit ceiling of the authority, as determined under Part III of Schedule 3 to the Act, was nil or a negative amount;

(b) at the time the receipt is received, the authority have no money outstanding by way of borrowing other than disregarded borrowing;

(d) if the receipt was derived from the disposal of an interest in a dwelling held for the purposes of Part II of the Housing Act 1985 (provision of housing accommodation)[^f00057], the disposal was made by virtue of Part V of that Act (the right to buy).

66

(1) In this regulation—

“capital in a bus company” means share capital or loan capital which— is in a company formed under section 59 or 67 of the Transport Act 1985[^f00058], and was acquired by the authority before 15th February 1989; or is in a company formed under section 61 of that Act, and was acquired by the authority before the date, if any, specified in relation to the company under subsection (9) of that section;

“capital in a public airport company” means share capital or loan capital which is in a public airport company, and which was acquired by the authority— before 15th February 1989; or on or after 15th February 1989 as consideration for a transfer to the company of any property or rights of the authority, or in advance of such a transfer by virtue of a scheme under section 15 of the Airports Act 1986[^f00059];

“education or training company” means a company which is engaged principally either— in the activities of providing, constructing, improving, repairing and maintaining land and any other assets in use for the purposes of a school which is a maintained school within the meaning given to that expression in section 305 of the Education Act 1993[^f00060]; or in the provision of the services which the Secretary of State is under a duty to secure under section 8 of the Employment and Training Act 1973 (careers services for school and college students)[^f00061], or has a power to secure under section 9 of that Act (careers services for others); and

“non-housing company”, in relation to any share capital or loan capital, means a company which has not, at any time since the date of issue of the capital concerned, engaged in any of the activities of providing, constructing, improving, managing, facilitating or encouraging the construction or improvement of housing accommodation; and

“public airport company” has the same meaning as in Part II of the Airports Act 1986.

(2) The reserved part shall be 75 per cent. in the case of a capital receipt, other than a nil per cent. receipt, which is received in respect of a disposal of share capital or loan capital in a body corporate, other than a disposal of share capital or loan capital which—

(a) is capital in a bus company;

(b) is capital in a public airport company;

(d) is in a company which was formed by, or with the participation of, the authority, and, at the time of the disposal, is an education or training company;

(e) is in a non-housing company, and was acquired by the authority—

(i) before 10th March 1988; or

(ii) on or after 1st April 1990 for the purpose of providing financial assistance under section 33 (promotion of economic development);

(f) is in a company formed by, or with the participation of, the authority for any of the purposes referred to in section 145(1) of the Local Government Act 1972 (provision of entertainments)[^f00062]; or

(g) is in a company formed by, or with the participation of, the authority as mentioned in subsection (3)(a) of section 32 of the Environmental Protection Act 1990 (transition to waste disposal companies)[^f00063], or pursuant to directions given by the Secretary of State under section 32(2) of that Act.

(3) The reserved part shall be 25 per cent. in the case of a capital receipt, other than a nil per cent. receipt, which is received during the peirod beginning on 1st April 1997 and ending on 31st March 1998 in respect of—

(a) a disposal of capital in a bus company; or

(b) a disposal of capital in a public airport company, where the company, by virtue of the disposal and the issue of any further share capital in the company, ceases to be a public airport company.

(4) The reserved part shall be 25 per cent. in the case of a capital receipt, other than a nil per cent. receipt, which is received during the period beginning on 1st April 1997 and ending on 31st March 1998 in respect of a disposal of share capital or loan capital in a company where—

(a) at the time of the disposal, the company is carrying on the business of operating an airport and is not a public airport company; and

(b) at the time when the authority acquired the share capital or loan capital, the company was carrying on the business of operating an airport, or was in the course of taking over that business from the authority.

Repayment of grants and other receipts

Grants and advances to housing associations

67

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