The Local Authorities (Capital Finance and Accounting) (Wales) Regulations 2003

Made: 9th December 2003

Coming into force

The National Assembly for Wales, in exercise of the powers conferred upon it by sections 3(5) to (7), 7(2)(b) and (3)(c), 8(3), 9(3), 10, 11, 15(1)(b), 16(2), 21(1) and (2), 23(2), 24, 123(2) and 124 of, and paragraph 4 of Schedule 1 to, the Local Government Act 2003[^f00001], hereby makes the following Regulations:

Name, commencement, application and interpretation

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• (1) These Regulations are called the Local Authorities (Capital Finance and Accounting) (Wales) Regulations 2003 and shall come into force for the purposes of regulations 1 and 2 on 31st December 2003 and for all other purposes on 1st April 2004.

• (2) These Regulations apply only in relation to local authorities in Wales.

• (3) In these Regulations any reference to a Part, section or Schedule is a reference to a Part or section of, or Schedule to, the Local Government Act 2003.

• (4) In these Regulations—

• “the 1993 Act” means the Leasehold Reform Housing and Urban Development Act 1993;

• “the 1997 Regulations” means the Local Authorities (Capital Finance) Regulations 1997[^f00002];

• “associates” has the same meaning as in section 136 of the 1993 Act (disposals of dwelling-houses by local authorities);

• “charter trustee” means a body constituted in accordance with section 246 of the Local Government Act 1972;

• ...

• “community council” means a community council or a town council in accordance with section 27 of the Local Government Act 1972;

• “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 7 of the Housing Act 1996 (Homelessness)[^f00003] 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;

• “dwelling-house” has the same meaning as in section 136 of the 1993 Act;

• “housing land” means any land, house or other building in relation to which the local authority is, or has been, subject to the duty under section 74 of the Local Government and Housing Act 1989 (Duty to keep Housing Revenue Account)[^f00004];

• “introductory standard contract” has the same meaning as in the Renting Homes (Wales) Act 2016 (see section 16 of that Act);

• “introductory tenant” has the same meaning as in chapter 1 of Part V of the Housing Act 1996 (introductory tenancies);

• “local authority” has the meaning given to it in section 23 of the Local Government Act 2003 in so far as it relates to Wales unless otherwise stated in these Regulations and includes a corporate joint committee established by regulations made under Part 5 of the Local Government and Elections (Wales) Act 2021 in so far as Part 1 of the Local Government Act 2003 applies to corporate joint committees by virtue of section 23(11) of the 2003 Act; and

• “long lease” means a lease for a term of years certain exceeding 21 years other than a lease which is terminable before the end of that term by notice given by or to the landlord;”;

• “money market fund” means a collective investment scheme which—. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .is authorised or recognised under Part XVII of the Financial Services and Markets Act 2000;

• “qualifying disposal” means a disposal of an interest in housing land which is a qualifying disposal for the purposes of section ... 136 of the 1993 Act (Disposals of dwelling-houses by local authorities)[^f00005].

• “relevant disposal period” means the period of 5 years ending with the date of the disposal;

• “secure contract” has the same meaning as in the Renting Homes (Wales) Act 2016 (see section 8 of that Act);

• “secure tenant” has the same meaning as in Part IV of the Housing Act 1985[^f00004] (secure tenancies and rights of secure tenants); ...

• “securitisation transaction” means a disposal for consideration by a local authority of all or part of its interest in specified revenues, where disposal includes both sale and assignment; and

• “small scale disposal” means a disposal by a local authority of an interest in housing land to any person where—the National Assembly for Wales has given consent to the disposal under section 32 (power to dispose of land held for the purposes of Part II) or 43 (consent required for certain disposals not within section 32) of the Housing Act 1985;it has given that consent subject to the conditions that the Local Authority—takes reasonable steps to ascertain whether the majority of secure tenants and introductory tenants who would be affected by the disposal are not opposed to it; andis satisfied that, at the time of the disposal, the majority of those tenants are not likely to be opposed to the disposal;andthe aggregate of the following, namely—the number of dwelling-houses included in the disposal; andthe number of dwelling-houses which, within the relevant disposal period, have been previously disposed of by the local authority to that person, or that person and any associates of that person taken together,is not more than 499,but for the purposes of this definition, a disposal of any dwelling-house must be disregarded if at the time of the disposal the local authority’s interest in the dwelling house is or was subject to a long lease.

PART 1 — BORROWING

Code of practice

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In complying with their duties under section 3(1) (duty to determine affordable borrowing limit), a local authority must have regard to the Prudential Code for Capital Finance in Local Authorities issued by the Chartered Institute of Public Finance and Accountancy[^f00006] as may be amended or reissued from time to time.

PART 2 — CREDIT ARRANGEMENTS

TRANSACTIONS WHICH ARE NOT CREDIT ARRANGEMENTS

Liabilities that do not arise from capital expenditure

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• (1) Subject to paragraphs (2) and (3) liabilities of a local authority that do not arise from the incurring by the authority of capital expenditure are liabilities specified for the purposes of section 7(3)(c) (Exclusion of certain liabilities from definition of “qualifying liabilities”).

• (2) Paragraph (1) does not apply where proper practices in accordance with regulation 25 require the recognition of a non-current asset which is not a financial asset.

• (3) Paragraph (1) applies to liabilities that are credit arrangements entered into after 31st March 2004.

• (4) Paragraph (1) does not apply where liabilities are credit arrangements in accordance with section 48 of the Local Government and Housing Act 1989 entered into before 1st April 2004 which are not funded by capital receipts or credit arrangements under section 50(3) of that Act until such arrangements cease or are varied in any way.

Retirement benefits

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• (1) Liabilities for retirement benefits as represented by an appropriation to a pension reserve in accordance with proper practices in accordance with regulation 25 are liabilities specified for the purposes of section 7(3)(c).

• (2) For the purposes of paragraph (1) and regulation 24 “retirement benefits” means benefits payable pursuant to statutory requirements under an arrangement accounted for as a defined benefit pension plan or as other long-term employee benefits (as defined in accordance with proper practices).

CALCULATION OF COST OF CREDIT ARRANGEMENTS AND OTHER CONTROLS

Calculation of cost of credit arrangements

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For the purposes of section 8(2) (entry into a credit arrangement or variation to be treated as the borrowing of an amount equal to the cost of the arrangement or variation), the cost of a credit arrangement or variation of a credit arrangement is—

• (a) in the case of a securitisation transaction, an amount equal to the value of the consideration received by the authority as a result of that transaction; or

• (b) in all other cases, the amount of the liability in respect of that arrangement or variation which is shown, in accordance with proper practices, in the authority’s accounts.

PART 3 — CAPITAL RECEIPTS

SUMS TO BE TREATED AS CAPITAL RECEIPTS

Repayment of loan etc. to a local authority

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• (1) For the purpose of Chapter 1 of Part 1 and subject to paragraph (3) of this regulation, the sums to which paragraph (2) refers must be treated as capital receipts.

• (2) Sums received by a local authority as repayment of the principal of an advance, a grant or any other financial assistance given by that local authority for such a purpose that, if the giving of that financial assistance had been expenditure incurred by the local authority at the time of the repayment, it would have constituted capital expenditure.

• (3) For the purpose of Chapter 1 of Part 1 and subject to regulation 6A below, the sums to which paragraphs (4) to (6) refer must not be treated as capital receipts.

• (4) Sums received by a local authority in connection with the repayment of the principal of an advance, a grant or any other financial assistance—

• (a) to an officer of the authority pursuant to the terms and conditions of that officer’s employment; or

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

• (5) Sums received by a local authority in respect of the redemption on maturity of a bond or the disposal of a bond.

• (6) Sums received by a community council or charter trustees as repayment of the principal of an advance, a grant or any other financial assistance given by that community council or charter trustees.

• (7) In paragraphs (4) and (5), “local authority” includes a community council and charter trustees.

Disposal of mortgage portfolio

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For the purposes of Chapter 1 of Part 1, a sum received by a local authority in respect of the disposal of the authority’s rights and obligations as mortgagee of any housing land which, apart from this regulation, would not be a capital receipt must be treated as a capital receipt.

Payment made to redeem landlord’s share

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For the purposes of Chapter 1 of Part 1, where an interim or final payment is made to a local authority in accordance with Schedule 6A to the Housing Act 1985[^f00013] (Redemption of landlord’s share), the sum received by the authority must be treated as a capital receipt if, apart from this regulation, it would not be a capital receipt.

SUMS NOT TO BE TREATED AS CAPITAL RECEIPTS

Capital receipts not exceeding £10,000

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• (1) A sum received by a local authority which, apart from this regulation, would be a capital receipt by virtue of section 9(1) must not be treated for the purposes of Chapter 1 of Part 1 as a capital receipt if the aggregate of all sums received or to be received by the authority in respect of the disposal of an interest in a capital asset, for which the sum is paid, does not exceed £10,000.

• (2) A sum received by a local authority which, apart from this regulation, would be treated as a capital receipt by virtue of regulation 6, must not be treated for the purposes of Chapter 1 of Part 1 as a capital receipt if the aggregate of all sums received or to be received by the authority in respect of—

• (a) the repayment of a grant or other financial assistance;

• (b) the payment made in respect of a grant or other financial assistance; or

• (c) the repayment of the principal of an advance,

as the case may be, in respect of which the sum is paid, does not exceed £10,000.

• (3) A sum received by a local authority which, apart from this regulation, would be treated as a capital receipt by virtue of regulation 7, must not be treated for the purposes of Chapter 1 of Part 1 as a capital receipt if the aggregate of all sums received or to be received by the authority in respect of the disposal of the authority’s rights and obligations, for which the sum is paid, does not exceed £10,000.

• (4) A sum received by a local authority which, apart from this regulation, would be treated as a capital receipt by virtue of regulation 8, must not be treated for the purposes of Chapter 1 of Part 1 as a capital receipt if the aggregate of all sums received or to be received by the authority in respect of redemption of the landlord’s share, for which the sum is paid, does not exceed £10,000.

• (5) A notional capital receipt which, apart from this regulation, would be treated as a capital receipt received by a local authority by virtue of regulation 15(5), must not be treated for the purposes of Chapter 1 of Part 1 as a capital receipt if the aggregate of all sums received or to be received by the authority, including the amount of all notional capital receipts determined, in respect of the disposal of the interest in housing land, for which the notional capital receipt is determined, does not exceed £10,000.

POOLING OF RECEIPTS

Pooling of receipts from disposals of housing land

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• (1) This regulation applies to capital receipts, received by a local authority which has a debt-free housing revenue account or a housing revenue account which is debt free for HRA subsidy purposes at the date of the disposal, on or after the date of the coming into force of these Regulations, which a local authority derives from the disposal of an interest in housing land other than a disposal which is a qualifying disposal or a small scale disposal.

• (2) For the purposes of paragraph (1) “debt-free” housing revenue account means a housing revenue account where the opening HRA capital financing requirement as defined in accordance with regulation 22(2) is nil or negative.

• (2A) for the purposes of paragraph (1) “a housing revenue account which is debt free for HRA subsidy purposes” means a housing revenue account where the opening HRA subsidy capital financing requirement as defined in accordance with Regulation 22(2) is nil or negative.

• (3)

• (a) Where this regulation applies, the local authority must pay the amount specified in paragraph (4) to the National Assembly for Wales by the end of one calendar month after—

• (i) 31st March;

• (ii) 30th June;

• (iii) 30th September; or

• (iv) 31st December,

whichever is the earliest date following the day on which the authority receives the capital receipt.

• (b) Where the date for payment under paragraph (a) would be a working day the amount referred to in that paragraph must be paid before the end of the next working day following that day.

• (4) Subject to paragraph (5) and regulations 16 and 17, the specified amount is an amount equal to—

• (a) 75 per cent of the capital receipt in relation to the disposal of a dwelling;

• (b) nil in relation to a disposal in accordance with paragraph (9); or

• (c) 50 per cent of the capital receipt in relation to the disposal of any other interest in housing land.

• (5) For the purposes of calculating the amount specified in paragraph (4), the capital receipt must be treated as reduced by—

• (a) so much of the receipt as is applied by the authority in defraying the administrative costs of and incidental to any such disposal; and

• (b) an amount, by which the authority determines that it must be reduced, which may be an amount up to the value of its available capital allowance at the time the amount specified in paragraph (4) is calculated.

• (6) Paragraph (5)(b) does not apply to receipts which a local authority derives from the disposal of a dwelling where the disposal is made—

• (a) under Part 5 of the Housing Act 1985[^f00014] (right to buy); or

• (b) with a relevant consent, to a person who, when that person acquires that dwelling, occupies or intends to occupy the dwelling as their only or principal home.

• (7) For the purposes of paragraph (6)(b), “relevant consent” means a consent to a disposal of land given by the Secretary of State to local authorities generally under section 32 or 43 of the Housing Act 1985.

• (8) The total amount of any reductions under paragraph (5), regulation 16 or regulation 17, in relation to a disposal, must not exceed the amount of the capital receipt for that disposal.

• (9) —

• (a) Subject to paragraph (9)(d) for the purposes of paragraph (4)(b) a disposal means a disposal of—

• (i) an interest in land where the land is held for the purposes of Part II of the Housing Act 1985 (provision of housing accommodation) and if there is a building situated on the land, the building does not, in the whole or in part, comprise a dwelling; or

• (ii) an interest in a dwelling where the dwelling was normally let, or available for letting, for the purposes of Part II of the Housing Act 1985 (provision of housing accommodation) and the authority make the disposal by granting a shared ownership lease (within the meaning given to that expression in section 622 of the Housing Act 1985), or on condition that the purchaser, for the purpose of repairing or improving the dwelling, will carry out significant works within a specified period; or

• (iii) an interest in a lease, other than a shared ownership lease, where the authority estimate that not less than 90 percent of the capital value of the lease has been, or is to be, received by them within one year after the date of disposal.

• (b) Paragraph (9)(a) (iii) is only applicable to paragraph (4)(b) where the authority make the disposal by—

• (i) conveying the freehold interest in the dwelling;

• (ii) granting a lease for a term of not less than 125 years;

• (iii) granting a shared ownership lease; or

• (iv) assigning their leasehold interest in the dwelling; and