The Local Authorities (Capital Finance) Regulations 1997

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.