2003 No. 3146

LOCAL GOVERNMENT, ENGLAND

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

Made

Laid before Parliament

Coming into force

for the purposes of regulations 1 and 2

for all other purposes

The Secretary of State, in exercise of the powers conferred upon him by sections 3, 7(3)(c), 8(3), 9(3), 10, 11, 15(1)(b), 16(2), 21, 23(2) and 123(1) and (2) of, and paragraph 4 of Schedule 1 to, the Local Government Act 20031, hereby makes the following Regulations:

PART 1PRELIMINARY

Citation, commencement, application and interpretationI41

1

These Regulations may be cited as the Local Authorities (Capital Finance and Accounting) (England) Regulations 2003 and shall come into force for the purposes of regulations 1 and 2 on 1st January 2004 and for all other purposes on 1st April 2004.

2

These Regulations apply only in relation to local authorities in England2.

3

Regulations 2 to 6, 8, 9, 10(3) to (6), 12 to 22, 23(d) to (f), 24, 27(1), 28, 29, 32 and 33 shall not apply to parish councils and charter trustees.

4

In these Regulations, unless the context indicates otherwise, 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.

5

In these Regulations—

  • F40“the 1993 Act” means the Leasehold Reform, Housing and Urban Development Act 1993;

  • F59“affordable housing” and “provision of affordable housing” have the meaning given in F52regulation 18;

  • F40“associates” has the same meaning as in section 135 of the 1993 Act (disposals of dwelling-houses by local authorities);

  • F13“available capital allowance” has the meaning given in regulation 15;

  • F10...

  • “CIPFA” means the body—

    1. a

      constituted by Royal Charter on 6th January 1959 and originally named “The Institute of Municipal Treasurers and Accountants”;

    2. b

      whose name was changed to “The Chartered Institute of Public Finance and Accountancy” by Royal Charter on 24th October 1973; and

    3. c

      registered with the Charity Commissioners of England and Wales (number 231060);

  • “debt-free authority” means a local authority which has no money outstanding by way of borrowing other than disregarded borrowing;

  • “disregarded borrowing” has the same meaning as that term had on 31st March 2004 in regulation 65 of the Local Authorities (Capital Finance) Regulations 1997 (capital receipts of debt-free authorities)3;

  • “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)4, 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;

  • F14“dwelling-house” has the same meaning as in section 135 of the 1993 Act;

  • “housing land” means any land, house or other building in relation to which the local authority is, or has been immediately before disposal of it, subject to the duty under section 74 of the Local Government and Housing Act 1989 (duty to keep Housing Revenue Account)5;

  • F58“introductory tenant” has the same meaning as in Chapter 1 of Part V of the Housing Act 1996 (introductory tenancies);

  • F58“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;

  • F23“money market fund” means a collective investment scheme which—

    1. a

      F60in accordance with Directive 2009/65/EC4 of the European Parliament and of the Council of 13 July 2009 on the co-ordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities, is an undertaking for collective investment in transferable securities subject to that Directive; and

    2. b

      is either a unit trust scheme authorised under section 243 of the Financial Services and Markets Act 2000 or a collective investment scheme recognised under section 264 of that Act;

  • F66...

  • “the National Association of Local Councils” means the unincorporated association of that name which was established in 19476;

  • F42“notifiable allowance” means the amount notified by the local authority to the Secretary of State in compliance with regulation 3 of the Local Authorities (Capital Finance and Accounting) (England) (Amendment) (No.2) Regulations 2012;

  • F42“poolable amount” means the sum of the specified amounts calculated from capital receipts received by the local authority in the quarter and the sub-liability calculated for the quarter;

  • “qualifying disposal” means a disposal of an interest in housing land which is a qualifying disposal for the purposes of section 135 or 136 of the F211993 Act (disposals of dwelling-houses by local authorities)7; F24...

  • F7“quarter” means one of the following periods—

    • 1st April to 30th June

    • 1st July to 30th September

    • 1st October to 31st December

    • 1st January to 31st March;

  • F41“relevant disposal period” means the period of five years ending with the date of the disposal;

  • F29“relevant quarter” means the quarter in respect of which payment under regulation 12 must be made on the next due date;

  • F41“secure tenant” has the same meaning as in Part IV of the Housing Act 1985 (secure tenancies and rights of secure tenants);

  • F1“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;

  • F48“shared ownership lease” means a lease of a dwelling granted on payment of a premium calculated by reference to a percentage of the market value of the dwelling;

  • F41“small scale disposal” means a disposal by a local authority of an interest in housing land to any person where—

    1. a

      the Secretary of State 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;

    2. b

      he has given that consent subject to the conditions that the local authority—

      1. i

        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; and

      2. ii

        is satisfied that, at the time of the disposal, the majority of those tenants are not likely to be opposed to the disposal;

      and

    3. c

      the aggregate of the following, namely—

      1. i

        the number of dwelling-houses included in the disposal; and

      2. ii

        the number of dwelling-houses which, within the relevant disposal period, have been previously disposed of by the authority to that person, or that person and any associates of his taken together,

      is not more than 499,

  • but for the purposes of this definition, a disposal of any dwelling-house shall 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; and

  • F10...

  • “the Society of Local Council Clerks” means the registered trade union of that name (Trade Union reference 1200T) which was established in 1972;

  • F31“specified amount” means the amount calculated in accordance with regulation 14;

  • F31“sub-liability” means the amount calculated in accordance with in paragraph 9 of the Schedule; and

  • F31“the 2011-2012 buy back reduction” means the amount calculated in compliance with regulation 3 of the Local Authorities (Capital Finance and Accounting) (England) (Amendment) (No 2) Regulations 2012.

PART 2BORROWING

Code of practiceI232

In complying with their duties under section 3(1) and (2) (duty to determine affordable borrowing limit), a local authority and the Mayor of London shall have regard to the code of practice entitled the “Prudential Code for Capital Finance in Local Authorities” published by CIPFA, as amended or reissued from time to time8.

Annotations:
Commencement Information
I23

Reg. 2 in force at 1.1.2004 for specified purposes and 1.4.2004 in so far as not already in force, see reg. 1(1)

PART 3CREDIT ARRANGEMENTS

F4TRANSACTIONS WHICH ARE CREDIT ARRANGEMENTS

Annotations:
Amendments (Textual)

Securitisation transactions2A

A securitisation transaction must be treated as a transaction falling within section 7(2)(a).

TRANSACTIONS WHICH ARE NOT CREDIT ARRANGEMENTS

Liabilities that do not arise from capital expenditureI253

1

The liabilities of a local authority specified in paragraph (2) are liabilities specified for the purposes of section 7(3)(c) (exclusion of certain liabilities from definition of “qualifying liabilities”).

2

The liabilities specified for the purposes of paragraph (1) are liabilities that do not arise from a transaction which results in the local authority being required, in accordance with proper practices, to recognise a F22non-current asset which is not a financial asset in any balance sheet.

Retirement benefitsI194

1

Liabilities for retirement benefits appropriated to a pension reserve in accordance with proper practices are liabilities specified for the purposes of section 7(3)(c).

C12

For the purposes of paragraph (1) and regulation 30, “retirement benefits” means benefits payable pursuant to F61statutory 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).

SUPPLEMENTARY PROVISION

Varied transactionsI275

For the purposes of Chapter 1 of Part 1 (capital finance etc.), a local authority shall be taken to have entered into a credit arrangement where—

a

on or after 1st April 2004, it enters into a transaction (“the new transaction”) which varies a transaction entered into previously, whether before, on or after 1st April 2004 (“the earlier transaction”);

b

the earlier transaction did not result in the local authority being taken to have entered into a credit arrangement; and

c

the local authority would, if it had entered into the earlier transaction as varied by the new transaction on—

i

the date on which the earlier transaction was entered into; or

ii

if later, 1st April 2004,

be taken to have entered into a credit arrangement,

and the date on which it is taken to have entered into the credit arrangement by virtue of this regulation is the date on which it enters into the new transaction.

Annotations:
Commencement Information
I27

Reg. 5 in force at 1.1.2004 for specified purposes and 1.4.2004 in so far as not already in force, see reg. 1(1)

COST OF CREDIT ARRANGEMENTS

Calculation of cost of credit arrangementsF3I176

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 4CAPITAL RECEIPTS

SUMS TO BE TREATED AS CAPITAL RECEIPTS

Repayment of loan etc. to a local authorityI187

1

For the purposes of Chapter 1 of Part 1 (capital finance etc), the sums referred to in paragraph (2), paid on or after 1st April 2004, shall be treated as capital receipts.

2

Subject to F54paragraphs (3) and (4), the sums referred to for the purposes of paragraph (1) are sums paid to a local authority as repayment of any loan, grant or other financial assistance given by the local authority for such a purpose that, if the giving of that financial assistance had been expenditure incurred at the time of the repayment, it would have constituted capital expenditure17.

3

Where the financial assistance referred to in paragraph (2) is a loan given by a parish council or charter trustees, any sums paid to the local authority as repayment of that loan shall not be treated as capital receipts.

F94

A sum paid to a local authority to redeem a bond on its maturity or for the purchase of a bond does not constitute repayment of a loan or other financial assistance.

F8Bonds7A

1

Subject to paragraph (2), for the purposes of Chapter 1 of Part 1, a sum received by a local authority in respect of—

a

the redemption on maturity of a bond, or

b

the disposal of a bond,

must be treated as a capital receipt.

2

Paragraph (1) applies only if—

a

the acquisition of the bond was prior to 1st April 2012, and

b

expenditure on the acquisition was treated as capital expenditure.

Disposal of mortgage portfolioI58

For the purposes of Chapter 1 of Part 1, a sum received by a local authority on or after 1st April 2004 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, shall be treated as a capital receipt.

Annotations:
Commencement Information
I5

Reg. 8 in force at 1.1.2004 for specified purposes and 1.4.2004 in so far as not already in force, see reg. 1(1)

Payment made to redeem landlord’s shareI269

For the purposes of Chapter 1 of Part 1, where an interim or final payment is made to a local authority, on or after 1st April 2004, in accordance with Schedule 6A to the Housing Act 1985 (redemption of landlord’s share)18, the sum received by the authority shall be treated as a capital receipt if, apart from this regulation, it would not be a capital receipt.

Annotations:
Commencement Information
I26

Reg. 9 in force at 1.1.2004 for specified purposes and 1.4.2004 in so far as not already in force, see reg. 1(1)

Social HomeBuy receiptsF499A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5Securitisation transaction receipts9B

For the purposes of Chapter 1 of Part 1, any sum received as consideration by a local authority as the result of a securitisation transaction which, apart from this regulation, would not be a capital receipt, must be treated as a capital receipt.

SUMS NOT TO BE TREATED AS CAPITAL RECEIPTS

Capital receipts not exceeding £10,000I910

1

F6... A sum received by a local authority which, apart from this regulation, would be a capital receipt by virtue of section 9(1) shall 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 7, shall 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 as repayment of a loan, grant or other financial assistance, for 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 8, shall 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 9, shall 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

F26... A notional capital receipt19 which, apart from this regulation, would be treated as a capital receipt received by a local authority by virtue of regulation 22(5), shall 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 interest in housing land, for which the notional capital receipt is determined, does not exceed £10,000.

6

In paragraphs (1) and (5), “all sums received or to be received by the authority” include the amount of all notional capital receipts determined in respect of the disposal.

F477

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating and finance leasesI2811

A sum received by a local authority—

a

under any arrangement which is treated, in accordance with proper practices, as an operating lease or a finance lease;

b

which, apart from this regulation, would be a capital receipt; and

c

which, in accordance with proper practices, is to be credited to a revenue account,

shall not be treated for the purposes of Chapter 1 of Part 1 as a capital receipt.

Annotations:
Commencement Information
I28

Reg. 11 in force at 1.1.2004 for specified purposes and 1.4.2004 in so far as not already in force, see reg. 1(1)

POOLING OF RECEIPTS

F65Pooling of receipts from housing land12

1

The local authority must use capital receipts to pay the poolable amount in respect of each quarter to the Secretary of State on or before the following dates (“the due date”)—

a

i

30th April;

ii

31st July;

iii

31st October; or

iv

31st January,

whichever of those days is the earliest day following the last day of the quarter; or

b

if later, such date as is notified to the local authority by the Secretary of State.

2

Where the poolable amount paid to the Secretary of State has been incorrectly calculated by the local authority, the local authority must—

a

pay any outstanding amount to the Secretary of State (including any interest payable under regulation 13); or

b

offset any amount paid in excess of the poolable amount against any further poolable amount payable to the Secretary of State under this regulation.

F65Interest on late payments13

1

The local authority must use capital receipts, which it derived from the disposal of housing land, to pay interest to the Secretary of State in accordance with the following provisions of this regulation.

2

Where the local authority does not pay part or all of the poolable amount to the Secretary of State by the due date, the local authority shall pay interest to the Secretary of State on the unpaid part amount of the poolable amount.

3

The interest shall be calculated on any unpaid amount at a rate of 1% above base rate on a day to day basis compounded with three-monthly rests.

4

Where interest is payable by virtue of paragraph (2), the interest on the unpaid amount shall be calculated for the period starting on the day after the due date and ending on the date of the payment of the unpaid amount.

5

The local authority must pay to the Secretary of State any interest, payable in respect of any unpaid amount, on the date on which it pays the unpaid amount.

6

In this regulation—

  • “base rate” means the base rate for the time being quoted by the reference banks or, where there is for the time being more than one such rate, the rate which, when the base rate quoted by each bank is ranked in descending sequence of seven, is fourth in the sequence; and

  • “reference banks” means the seven largest persons for the time being who—

    1. i

      have permission under Part IV of the Financial Services and Markets Act 2000 (permission to carry on regulated activities) to accept deposits;

    2. ii

      are incorporated in the United Kingdom and carry on there a regulated activity of accepting deposits; and

    3. iii

      quote a base rate in sterling,

  • and for the purpose of this definition the size of any person at any time is to be determined by reference to the gross assets denominated in sterling by that person, together with any subsidiary (as defined in section 1159 of the Companies Act 2006), as shown in the audited end-of-year accounts last published before that time.

F65Specified amountI2914

1

This regulation applies to capital receipts which—

a

a local authority derives from the disposal of an interest in housing land other than a disposal which is—

i

a qualifying disposal;

ii

a small scale disposal;

iii

land that is the subject of an agreement made under section 80B of the Local Government and Housing Act 1989; or

iv

a disposal to which the Schedule applies; and

b

were received by the local authority on or after 1st April 2004.

2

Where this regulation applies and subject to any reductions made under regulations 15 to 17, the specified amount is an amount equal to—

a

75% of the capital receipt in relation to the disposal of a dwelling;

b

to the extent not included in sub-paragraph (a), 75% of the capital receipt received by a local authority on or after 1st April 2006, in relation to the disposal of the authority’s rights and obligations as mortgagee of any dwelling; and

c

50% of the capital receipt in relation to the disposal of any other interest in housing land.

3

For the purpose of calculating the specified amount, the total amount of any reductions made to the capital receipt for a disposal under regulations 15 to 19 shall not exceed the amount of that capital receipt.

Annotations:
Commencement Information
I29

Reg. 14 in force at 1.1.2004 for specified purposes and 1.4.2004 in so far as not already in force, see reg. 1(1)

F65Capital receipt treated as reducedI1615

1

Subject to regulation 14(3) and paragraph (2), for the purposes of calculating the specified amount the capital receipt, in relation to a disposal of an interest in housing land shall be treated as reduced by—

a

so much of the capital receipt as is applied by the local authority in meeting the administrative costs of and incidental to the disposal;

b

the costs of expenditure incurred by the local authority in improving the housing land within the period of three years ending on the date of the disposal; and

c

an amount, by which the authority determines that it shall be reduced, which may be any amount up to the value of the local authority’s available capital allowance at the time the specified amount is calculated.

2

Paragraph (1)(c) shall not apply to capital receipts which a local authority derives from the disposal of a dwelling made prior to 1 April 2012—

a

under Part V of the Housing Act 1985 (right to buy); or

b

in accordance with a relevant consent, to a person who, when he acquires that dwelling, occupies or intends to occupy the dwelling as his only or principal home.

3

Paragraph (1)(c) shall not apply to capital receipts received by a local authority on or after 1st April 2006, which the local authority receives from the disposal of the authority’s rights and obligations as mortgagee of a dwelling, where that dwelling (“the disposed dwelling”) was disposed of by the authority—

a

under Part V of the Housing Act 1985 (right to buy); or

b

in accordance with a relevant consent, to a person who, when he acquires that dwelling, occupies or intends to occupy the dwelling as his only or principal home.

4

For the purposes of paragraphs (2)(b) and (3)(b), “relevant consent” means a consent to a disposal of land given by the Secretary of State generally under section 32 or 43 of the Housing Act 1985 (disposal of land held for housing purposes).

Annotations:
Commencement Information
I16

Reg. 15 in force at 1.1.2004 for specified purposes and 1.4.2004 in so far as not already in force, see reg. 1(1)

F65Available capital allowanceI1516

For the purpose of regulation 15(1)(c), the value of the local authority’s available capital allowance at a particular time is the value of the total capital allowance at that time, as determined by the authority in accordance with regulation 17, less the total value of any amounts by which capital receipts have been treated as reduced by virtue of regulation 15(1)(c) since 1st April 2012.

Annotations:
Commencement Information
I15

Reg. 16 in force at 1.1.2004 for specified purposes and 1.4.2004 in so far as not already in force, see reg. 1(1)

Available Social HomeBuy allowanceF6516A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Social HomeBuy allowanceF6516B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F65Total capital allowanceI817

1

Subject to paragraph (4), for the purposes of regulation 16, a local authority’s total capital allowance is the total value of—

a

the notifiable allowance;

b

the amount of the contributions which the authority has made, or has decided to make but has not yet made, on or after 1 April 2012, towards the costs of the projects specified in regulations 18 or 19 by—

i

constructing or improving dwellings, or providing dwellings by the conversion of a building or part of a building;

ii

making a gift of land;

iii

paying a contribution, grant or subsidy under any power conferred on the authority by or under any enactment; or

iv

giving consideration for any benefit that the authority has received, or will receive, by virtue of the project; and

c

any amount of capital receipt to which regulation 14 applies used to reduce the housing debt of the local authority.

2

For the purposes of paragraph (1)(b)(ii), the authority makes a gift of land where it transfers an interest in land and either—

a

no consideration falls to be given for the transfer; or

b

the value of the consideration that falls to be given for the transfer is less than the price that the interest transferred would realise at the date of the valuation if sold by the authority on the open market.

3

For the purposes of paragraph (1)(c), the housing debt of a local authority means the housing debt calculated in a determination made under section 171 of the Localism Act 2011.

4

The total capital allowance shall not include any expenditure—

a

already included in the calculation of the total capital allowance; or

b

by which a capital receipt has been treated as reduced under regulation 15(1)(c).

Annotations:
Commencement Information
I8

Reg. 17 in force at 1.1.2004 for specified purposes and 1.4.2004 in so far as not already in force, see reg. 1(1)

F65Provision of affordable housingI2118

1

In these Regulations, “provision of affordable housing” means the provision of dwellings to meet the housing needs, as identified by the local authority, of persons on low incomes, whether provided by the authority or a private registered provider of social housing.

2

For the purposes of regulation 17(1)(b), the provision of affordable housing is a specified project.

Annotations:
Commencement Information
I21

Reg. 18 in force at 1.1.2004 for specified purposes and 1.4.2004 in so far as not already in force, see reg. 1(1)

F65Regeneration projectsI219

1

In these Regulations, “regeneration project” means any project for the carrying out of works or activities on any land where—

a

the land or a building on the land is vacant, unused, under-used, ineffectively used, contaminated or derelict; and

b

the works or activities are carried out in order to secure that the land or the building will be brought into effective use.

2

For the purposes of regulation 17(1)(b), the undertaking of a regeneration project on land situated within the area of the local authority is a specified project.

Annotations:
Commencement Information
I2

Reg. 19 in force at 1.1.2004 for specified purposes and 1.4.2004 in so far as not already in force, see reg. 1(1)

Capital receipts reduced by costs of buying back dwellings in the preceding yearF6520

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Capital receipts reduced by consideration for former new town assetsF6520A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transitional reductions for debt-free authoritiesF6521

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-money receiptsI1022

1

Subject to paragraphs (2) to (4), where on or after 1st April 2004 a local authority makes a disposal, other than a qualifying disposal F43or a small scale disposal, of an interest in housing land—

a

which is a disposal of the kind mentioned in section 9(1) (capital receipt) and the consideration for the disposal does not consist wholly of money payable to the authority; or

b

in respect of which the authority receives otherwise than in the form of money any consideration which, if received in that form, would be a capital receipt under section 9,

the authority shall determine the amount (the “notional capital receipt”) which would have been the capital receipt if the consideration for the disposal had been wholly in money payable to the authority.

2

Where money is payable to the authority in respect of the disposal, the notional capital receipt shall be determined by deducting the amount of that money from the amount which would have been the capital receipt if the consideration for the disposal had been wholly in money payable to the authority.

3

Where the consideration for the disposal, or part of the consideration, consists of —

a

the grant of a right to the local authority to nominate a person either to occupy any dwelling or to acquire the freehold of, or a leasehold interest in, any dwelling; or

b

an undertaking given to the local authority to allow only a person of a particular description to occupy any dwelling or acquire the freehold of, or a leasehold interest in, any dwelling,

the amount of the notional capital receipt in respect of that consideration or that part of the consideration, as the case may be, shall be treated as nil.

4

For the purposes of determining the notional capital receipt for a disposal, the consideration for the disposal shall be deemed to be received by the authority at the time that the authority makes the disposal.

5

For the purposes of Chapter 1 of Part 1, a notional capital receipt shall be treated as a capital receipt and the amount specified in regulation 12(4) shall be calculated accordingly.

MISCELLANEOUS

Use of capital receiptsI1423

Capital receipts may only be used for one or more of the following purposes—

a

to meet capital expenditure;

b

to repay the principal of any amount borrowed;

c

to pay a premium charged in relation to any amount borrowed;

d

to meet any liability in respect of credit arrangements, other than any liability which, in accordance with proper practices, must be charged to a revenue account;

e

to meet the F57... costs of or incidental to a disposal of an interest in housing land; or

f

to make a payment to the Secretary of State under regulation 12 or 13; F39...

F55g

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F17h

to meet the costs of or incidental to a disposal of an interest in land other than housing land, provided these do not exceed 4% of the capital receipt arising from the disposal; or

i

to make all or part of a payment to a person, where the obligation to make that payment arises on the disposal of an asset, as a result of an agreement made at the time of the acquisition of that asset, or in relation to such an agreement.

PART 5SUPPLEMENTARY

GuidanceI1124

In carrying out its functions under Chapter 1 of Part 1, a local authority shall have regard to the code of practice contained in the document entitled “Treasury Management in the Public Services: Code of Practice and Cross-Sectoral Guidance Notes” published by CIPFA, as amended or reissued from time to time31.

Annotations:
Commencement Information
I11

Reg. 24 in force at 1.1.2004 for specified purposes and 1.4.2004 in so far as not already in force, see reg. 1(1)

Expenditure to be capital expenditureI325

1

For the purposes of Chapter 1 of Part 1 the following expenditure of a local authority, incurred on or after 1st April 2004, shall be treated as being capital expenditure insofar as it is not capital expenditure by virtue of section 16(1) —

a

expenditure incurred on the acquisition or preparation of a computer program, including expenditure on the acquisition of a right to use the program, if the authority acquire or prepare the program for use for a period of at least one year for any purpose relevant to its functions;

b

subject to paragraph (2), the giving of a loan, grant or other financial assistance to any person, whether for use by that person or by a third party, towards expenditure which would, if incurred by the authority, be capital expenditure;

c

the repayment of any grant or other financial assistance given to the local authority for the purposes of expenditure which is capital expenditure;

d

F51subject to paragraph (3), the acquisition of share capital F20... in any body corporate; F34...

e

expenditure incurred on works to any land or building in which the local authority does not have an interest, which would be capital expenditure if the local authority had an interest in that land or building F30; and

F32ea

expenditure incurred on the acquisition, production or construction of assets for use by, or disposal to, a person other than the local authority which would be capital expenditure if those assets were acquired, produced or constructed for use by the local authority; and

f

the payment of any levy by a local authority under section 136 of the Leasehold Reform Housing and Urban Development Act 1993 (levy on disposals).

2

Where the expenditure referred to in paragraph (1)(b) is a loan given by a parish council or charter trustees to any person, it shall not be treated as being capital expenditure by virtue of this regulation.

F373

Where the expenditure referred to in paragraph (1)(d) is—

a

an investment in a money market fund; or

F44b

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F46c

an investment in the shares of a company to which Part 4 of the Finance Act 2006 (Real Estate Investment Trusts) applies F35; or

F18d

the acquisition of shares in an investment scheme approved by the Treasury under section 11(1) of the Trustee Investments Act 1961 (local authority investment schemes),

it shall not be treated as being capital expenditure by virtue of this regulation.

Expenditure not to be capital expenditureI2026

Expenditure incurred by a local authority on the giving of loans, 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 capital expenditure, shall be treated for the purposes of Chapter 1 of Part 1 as not being capital expenditure.

Annotations:
Commencement Information
I20

Reg. 26 in force at 1.1.2004 for specified purposes and 1.4.2004 in so far as not already in force, see reg. 1(1)

PART 6REVENUE PROVISION

Duty to make revenue provisionI727

1

During the financial year beginning on 1st April 2004 and every subsequent financial year, a local authority—

a

shall charge to a revenue account a minimum amount (“minimum revenue provision”) for that financial year; and

b

may charge to a revenue account any amount in addition to the minimum revenue provision,

in respect of the financing of capital expenditure incurred by the local authority in that year or in any financial year prior to that year.

2

During the financial year beginning on 1st April 2004 and every subsequent financial year, a parish council or charter trustees may charge to a revenue account any amount in respect of the financing of capital expenditure incurred by the parish council or the charter trustees, as the case may be, in that year.

Annotations:
Commencement Information
I7

Reg. 27 in force at 1.1.2004 for specified purposes and 1.4.2004 in so far as not already in force, see reg. 1(1)

F2Determination of minimum revenue provision28

A local authority shall determine for the current financial year an amount of minimum revenue provision which it considers to be prudent.

F19Past deficiencies in minimum revenue provisionI629

1

Where in any financial year beginning before 1st April 2007, the amount of minimum revenue provision charged by a local authority to a revenue account is less than the amount required for that year (whether by reason of an error in the calculation of that amount or otherwise)—

a

if the local authority has not made a charge to a revenue account on or after 1st April 2004 to correct the insufficient provision, the amount so charged shall be treated as correct and shall not be reconsidered in any circumstances; or

b

if the local authority has made a charge to a revenue account on or after 1st April 2004 to correct the insufficient provision, the local authority may, in a financial year beginning before 1st April 2010, record in a revenue account a credit no greater in value than the amount of that charge.

2

Any local authority which treats any amount as correct under paragraph (1)(a) shall include a note to that effect in its statement of accounts for a financial year ending no later than 31st March 2010.

3

Any local authority which records a credit in a revenue account under paragraph (1)(b) shall include a note to that effect in its statement of accounts for the year in which the credit is recorded.

4

In this regulation, “minimum revenue provision”—

a

in relation to financial years beginning before 1st April 2004, has the same meaning as was given in relation to those years in section 63(1) of the Local Government and Housing Act 1989 prior to its repeal; and

b

in relation to subsequent financial years, has the meaning given in regulation 27.

PART 7ACCOUNTS

F11Accounting for capital expenditure29A

Where expenditure of a local authority—

a

is expenditure which falls to be capitalised in accordance with proper practices (“capital expenditure”); or

b

is treated as being capital expenditure by virtue of regulations made, or a direction given, under section 16(2),

that expenditure need not be charged to a revenue account of the local authority.

Retirement benefitsI22C230

For a financial year beginning on or after 1st April 2004, a local authority shall charge to a revenue account an amount equal to the retirement benefits payments and contributions to pension funds which are payable for that financial year in accordance with the F33statutory requirements mentioned in regulation 4(2).

F38Back payment following unequal pay30A

1

For the purposes of this regulation—

a

a reference to an employee of a local authority includes a reference to a former employee, an officer or a former officer of the authority;

b

a reference to the contract under which an employee was or is employed includes a reference to the terms of appointment under which an officer held or holds office; and

c

an employee of a local authority received unequal pay when the amount of pay he received from the authority for work done by him during a particular period is less than the appropriate amount of pay for that work done during that period.

2

In this regulation—

  • “appropriate amount of pay”, in relation to an employee of a local authority, means the amount of pay to which the employee is entitled in accordance with any equality clause deemed to be included, by virtue of section 1(1) of the Equal Pay Act 1970, in the contract under which he was or is employed;

  • “back payment” means a payment of arrears of remuneration made by a local authority, for work—

    1. a

      done by an employee of the authority;

    2. b

      in respect of which the employee received unequal pay; and

    3. c

      done before the employee first receives any increase in pay as a result of receiving that unequal pay,

    which is paid to the employee, or part of which is paid to the employee (“the net payment”) and part of which is paid to another person on behalf of the employee (“relevant deductions”), because the employee received unequal pay for that work; and

  • “social security costs” means any contributions by a local authority to any state social security or pension scheme, fund or arrangement.

3

Where a local authority—

a

is required by an employment tribunal or a court to make a back payment;

b

i

considers that it is probable that an employment tribunal or a court will require it to make a back payment; and

ii

is able to make a reasonable estimate of the amount of such back payment;

c

has reached an agreement or otherwise determined to make a back payment; or

d

i

considers that it is probable that it will reach an agreement or otherwise determine to make a back payment; and

ii

is able to make a reasonable estimate of the amount of such back payment,

paragraph (4) shall apply.

4

Where this paragraph applies, the authority need not charge to a revenue account an amount in respect of—

a

the back payment; or

b

social security costs or other costs incurred by the authority in relation to that back payment,

until the date on which the authority must pay that back payment, or the net payment, to the employee (as required by the tribunal or court or in accordance with the agreement or determination, as the case may be).

F505

Subject to paragraph (6), this regulation ceases to have effect on 1st April 2013.

6

Where paragraph (4) applies to an amount, it continues to apply until the date on which the payment is actually made, whether or not the date is on or after 1st April 2013.

F12Early repayment of loans – premiums and discounts at 31st March 200730B

1

This regulation applies where—

a

before 1st April 2007 a local authority repays a loan of money before the date on which the authority is required, in accordance with the terms of the loan, to fully repay the whole or the remaining part of it;

b

as a consequence of such early repayment—

i

the authority is required to pay a premium to the lender of the loan or is required, in accordance with proper practices, to account for an amount in respect of a premium as if it were required to pay such a premium; or

ii

the lender of the loan gives the authority a discount on the loan or the authority is required, in accordance with proper practices, to account for an amount in respect of a discount as if the lender had given the authority such a discount; and

c

i

in the case of a premium, an amount in respect of the premium included, in accordance with proper practices, in the authority’s balance sheet at 1st April 2007 is less than the amount so included immediately before that date;

ii

in the case of a discount, an amount in respect of the discount included, in accordance with proper practices, in the authority’s balance sheet at 1st April 2007 is less than the amount so included immediately before that date.

2

This regulation does not apply in relation to an amount in respect of a discount where, before 1st April 2007, a local authority credited the total amount of the discount to a revenue account in accordance with proper practices or with proper accounting practices which the authority was required to follow at that time.

3

Subject to paragraphs (4) and (5), where this regulation applies, in each relevant year, the amount that a local authority shall charge to a revenue account for that year in respect of the premium or credit to a revenue account for that year in respect of the discount, as the case may be—

a

in the case of a premium, shall be an amount which is the same as or greater than the amount calculated in accordance with the formula specified in paragraph (6);

b

in the case of a discount, shall be an amount which is the same as or less than the amount calculated in accordance with that formula.

4

In the case of a premium, where, in relation to a relevant year, the result of the calculation of the formula specified in paragraph (6) is nil, the authority shall not charge any amount to a revenue account for that year in respect of the premium.

5

By the end of the final year, the total amount charged by the authority to a revenue account in respect of the premium or credited by the authority to a revenue account in respect of the discount shall equal the amount of the premium or the discount, as the case may be.

6

The formula specified for the purposes of paragraphs (3) and (4) is—

where—

  • “A” is—

    1. a

      in the case of a premium, the amount in respect of the premium included in the local authority’s balance sheet immediately before 1st April 2007 less the amount in respect of the premium included in the authority’s balance sheet at 1st April 2007;

    2. b

      in the case of a discount, the amount in respect of the discount included in the local authority’s balance sheet immediately before 1st April 2007 less the amount in respect of the discount included in the authority’s balance sheet at 1st April 2007;

  • “B” is the total of—

    1. a

      in the case of a premium—

      1. i

        any amounts charged to a revenue account before the current year, by virtue of this regulation, in respect of the premium; and

      2. ii

        any capital receipts used on or after 1st April 2007 to pay any part of the premium;

    2. b

      in the case of a discount, any amounts credited to a revenue account before the current year, by virtue of this regulation, in respect of the discount; and

  • “C” is the number of financial years from the current year to the final year inclusive.

7

In this regulation, any reference to an amount included in an authority’s balance sheet shall, if no such amount was included, be construed as a reference to nil.

8

In this regulation—

  • “current year” means the financial year for which the local authority is calculating the amount to charge or credit to its revenue account in accordance with this regulation;

  • “final year” means—

    1. a

      in the case of a premium—

      1. i

        the financial year in which the whole or the remaining part of the loan would have been due to be fully repaid in accordance with the terms of the loan if the loan had not been repaid before that financial year; or

      2. ii

        if later, the financial year in which the whole or the remaining part of any replacement loan (or, if more than one, the replacement loan which is due to be fully repaid last) is due to be fully repaid in accordance with the terms of the replacement loan;

    2. b

      in the case of a discount—

      1. i

        the financial year in which the whole or the remaining part of the loan would have been due to be fully repaid in accordance with the terms of the loan if the loan had not been repaid before that financial year; or

      2. ii

        if earlier, the financial year which ends on 31st March 2016;

  • “relevant year” means the financial year which begins on 1st April 2007 and each subsequent financial year until, and including, the final year; and

  • “replacement loan” means any loan of money to the local authority some or all of which the authority treats, for accounting purposes, as a replacement for some or all of the loan referred to in sub-paragraph (a) of paragraph (1).

F12Early repayment of loans – premiums and discounts after 31st March 200730C

1

This regulation applies where—

a

a local authority repays a loan of money on or after 1st April 2007 but before the date on which the authority is required, in accordance with the terms of the loan, to fully repay the whole or the remaining part of it;

F16b

as a consequence of such early repayment—

i

the authority is required to pay a premium to the lender of the loan or is required, in accordance with proper practices, to account for an amount in respect of a premium as if it were required to pay such a premium; or

ii

the lender of the loan gives the authority a discount on the loan or the authority is required, in accordance with proper practices, to account for an amount in respect of a discount as if the lender had given the authority such a discount; and

c

the authority is not required, in accordance with proper practices, to include an amount in respect of the premium or the discount, as the case may be, in its balance sheet on or after 1st April 2007.

2

Subject to paragraphs (3) and (4), where this regulation applies, in the initial year and in each subsequent financial year until, and including, the final year, the amount that the authority shall charge to a revenue account for that year in respect of the premium or credit to a revenue account for that year in respect of the discount, as the case may be—

a

in the case of a premium, shall be an amount which is the same as or greater than the amount calculated in accordance with the formula specified in paragraph (5);

b

in the case of a discount, shall be an amount which is the same as or less than the amount calculated in accordance with that formula.

3

In the case of a premium, where, in relation to a financial year referred to in paragraph (2), the result of the calculation of the formula specified in paragraph (5) is nil, the authority shall not charge any amount to a revenue account for that year in respect of the premium.

4

By the end of the final year, the total amount charged by the authority to a revenue account in respect of the premium or credited by the authority to a revenue account in respect of the discount shall equal the amount of the premium or the discount, as the case may be.

5

The formula specified for the purposes of paragraphs (2) and (3) is—

where—

  • “D” is the amount of the premium or the amount of the discount, as the case may be;

  • “E” is the total of—

    1. a

      in the case of a premium—

      1. i

        any amounts charged to a revenue account before the current year, by virtue of this regulation, in respect of the premium; and

      2. ii

        any capital receipts used to pay any part of the premium;

    2. b

      in the case of a discount, any amounts credited to a revenue account before the current year, by virtue of this regulation, in respect of the discount; and

  • “F” is the number of financial years from the current year to the final year inclusive.

6

In this regulation—

  • “current year” means the financial year for which the local authority is calculating the amount to charge or credit to its revenue account in accordance with this regulation;

  • “final year” means—

    1. a

      in the case of a premium—

      1. i

        the financial year in which the whole or the remaining part of the loan would have been due to be fully repaid in accordance with the terms of the loan if the loan had not been repaid before that financial year; or

      2. ii

        if later, the financial year in which the whole or the remaining part of any replacement loan (or, if more than one, the replacement loan which is due to be fully repaid last) is due to be fully repaid in accordance with the terms of the replacement loan;

    2. b

      in the case of a discount—

      1. i

        the financial year in which the whole or the remaining part of the loan would have been due to be fully repaid in accordance with the terms of the loan if the loan had not been repaid before that financial year; or

      2. ii

        if earlier, the ninth financial year after the initial year (counting the financial years, immediately following the initial year, consecutively);

  • F53“initial year” means the financial year in which the loan is repaid; and

  • “replacement loan” means any loan of money to the local authority some or all of which the authority treats, for accounting purposes, as a replacement for some or all of the loan referred to in sub-paragraph (a) of paragraph (1).

F12Interest on loans given by local authorities30D

1

Where—

a

on or after 1st April 2007, a local authority gives a loan to a person;

b

the authority, in accordance with proper practices, includes an amount in respect of that loan in its balance sheet at the end of the financial year in which the loan is given (“the loan year”); and

c

the amount referred to in sub-paragraph (b) is less than the amount of the loan outstanding at the end of the loan year,

paragraph (3) shall apply.

2

Where—

a

a local authority gave a loan to a person before 1st April 2007 and the whole or any remaining part of the loan is outstanding on or after 1st April 2007;

b

the authority, in accordance with proper practices, includes an amount in respect of that loan in its balance sheet at the end of the financial year which began on 1st April 2007 (“the 2007 financial year”); and

c

the amount referred to in sub-paragraph (b) is less than the amount of the loan outstanding at the end of the 2007 financial year,

paragraph (3) shall apply.

3

Where this paragraph applies, the amount of the interest, if any, in respect of the loan, which the local authority credits to its revenue account—

a

i

where the loan was given on or after 1st April 2007, in the loan year; or

ii

where the loan was given before 1st April 2007, in the 2007 financial year; and

b

in each subsequent year until, and including, the financial year in which the whole or any remaining part of the loan is fully repaid,

shall be the amount of the interest, if any, which it is due to receive in that year in accordance with the loan agreement for that loan.

F25Interest on stepped interest rate loans taken out by local authorities30E

1

This regulation applies where on any day before 9th November 2007 a local authority had taken out a stepped interest rate loan.

2

The local authority shall charge to a revenue account for each financial year beginning with the financial year ending on 31st March 2008 and ending with the last financial year in which the loan agreement subsists—

a

the amount of the interest, if any, which it is due to pay in that financial year in accordance with the loan agreement; or

b

an amount calculated in accordance with the accounting practices identified in regulation 31.

3

In this regulation, “stepped interest rate loan” means a loan taken out by a local authority at an interest rate which increases in one or more increments during the period for which the loan agreement subsists.

F25Financial guarantees given by local authorities30F

1

This regulation applies where on any day before 9th November 2007 a local authority had given a financial guarantee on behalf of another person.

2

The amount the local authority charges to a revenue account with respect to the guarantee for each financial year beginning with the financial year ending on 31st March 2008 and ending with the last financial year in which the risk guaranteed subsists shall be calculated either—

a

in accordance with proper practices for the financial year beginning on 1st April 2006; or

b

in accordance with the accounting practices identified in regulation 31.

F64Impairment of certain investments30G

1

Where, in relation to a relevant investment, in accordance with proper practices—

a

an impairment loss is recognised in a revenue account of the authority for the financial year beginning on 1st April 2008;

b

an impairment loss is recognised in a revenue account of the authority for the financial year beginning on 1st April 2009; or

c

the value of an impairment loss recognised in a revenue account of the authority for the financial year beginning on 1st April 2008 is increased in a revenue account of the authority for the financial year beginning on 1st April 2009,

the local authority may credit to a revenue account for the year in which the loss is recognised, or increased in value, any amount up to the amount of the loss.

2

A local authority which under paragraph (1) credits an amount to a revenue account for the financial year beginning on 1st April 2008 may debit an amount of up to the value of that credit to a revenue account for the financial year beginning on 1st April 2009.

3

Subject to paragraph (6), where—

a

under paragraph (1) a local authority credits an amount to a revenue account for the financial year beginning on 1st April 2008; and

b

in accordance with proper practices—

i

the value of the impairment loss that credit relates to is reduced in the financial year beginning on 1st April 2009, and

ii

the authority credits an amount to a revenue account for that year to recognise that reduction,

the local authority must debit to a revenue account for the financial year beginning on 1st April 2009 an amount equal to the credit mentioned in sub-paragraph (b)(ii).

4

Subject to paragraph (6), where—

a

under paragraph (1) a local authority credits an amount to a revenue account for the year beginning on 1st April 2008; and

b

in accordance with proper practices, the authority credits or has credited any amount to a revenue account before 1st April 2009 in respect of interest on the relevant investment not received on or before the date of the event giving rise to the impairment loss,

the local authority must debit to a revenue account for the financial year beginning on 1st April 2008 an amount equal to the total of the amounts mentioned in sub-paragraph (b).

5

Subject to paragraph (6), where—

a

under paragraph (1) a local authority credits an amount to a revenue account for the year beginning on 1st April 2008 or 1st April 2009; and

b

in accordance with proper practices, the authority credits or has credited any amount to a revenue account before 1st April 2010 in respect of interest on the relevant investment not received on or before the date of the event giving rise to the impairment loss,

to the extent it has not debited an amount under paragraph (4) in respect of the interest, the local authority must debit to a revenue account for the financial year beginning on 1st April 2009 an amount equal to the total of the amounts mentioned in sub-paragraph (b).

6

A local authority need not under paragraphs (3) to (5) debit to a revenue account a total amount that exceeds the total amount it has credited under paragraph (1).

7

In paragraph (6), the reference to the total amount credited under paragraph (1) is a reference to that amount as reduced by a debit under paragraph (2).

8

Where under paragraph (1) a local authority credits an amount to a revenue account, it must debit to a revenue account for the financial year beginning on 1st April 2010 an amount equal to the value of that credit to the extent the credit has not been reversed by debits under paragraphs (2) to (5).

9

In this regulation, a relevant investment is a local authority investment—

a

in a bank;

b

affected by an event in the period commencing on 1st April 2008 and ending on 26th November 2008,

other than an investment of the type described in section 17(1)(e).

F62Short-term accumulating compensated absences30H

Where, in accordance with proper practices, a local authority includes an amount in respect of a liability for short-term accumulating compensated absences in its balance sheet, the authority must not charge to a revenue account an amount in respect of that liability until the date on which the liability ceases or is discharged.

F27Lease classification30I

1

Where, on or after 1st April 2009, a local authority receives money under an arrangement—

a

which is in existence on, and is not treated according to proper practices as a finance lease at, 31st March 2010, and

b

all or part of that arrangement will be treated according to proper practices as a finance lease on or after 1st April 2010,

the money received under that arrangement may be accounted for in accordance with proper practices applying to that arrangement on 31st March 2010.

2

Where, on or after 1st April 2009, a local authority receives money under an arrangement—

a

which is in existence on, and is not treated according to proper practices as an operating lease at, 31st March 2010, and

b

all or part of that arrangement will be treated according to proper practices as an operating lease on or after 1st April 2010,

the money received under that arrangement may be accounted for in accordance with proper practices applying to that arrangement on 31st March 2010.

Proper practicesI1331

For the purposes of section 21(2) (accounting practices) the accounting practices contained in the following codes of practice and guide are proper practices—

a

“F36...Code of Practice on Local Authority Accounting in the United Kingdom” published by CIPFA, as amended or reissued from time to time40;

F45b

“Service Reporting Code of Practice for Local Authorities” published by CIPFA, as amended or reissued from time to time;

F63c

“in relation to parish councils only, Governance and Accountability for Local Councils: A Practitioners’ Guide 2008 (England)” published jointly by the National Association of Local Councils and the Society of Local Council Clerks, as amended or reissued from time to time.

PART 8MISCELLANEOUS PROVISIONS

Local authorities for the purposes of Part 1 of the Local Government Act 2003 – levying bodiesI1232

The following levying bodies, within the meaning of section 74 of the Local Government Finance Act 1988 (levies)43, are specified for the purposes of section 23(1)(o) (local authorities for the purposes of Part 1)—

a

the Broads Authority44;

b

the Lee Valley Regional Park Authority45;

c

a National Park authority46;

d

the London Pensions Fund Authority47; and

e

the South Yorkshire Pensions Authority48.

Annotations:
Commencement Information
I12

Reg. 32 in force at 1.1.2004 for specified purposes and 1.4.2004 in so far as not already in force, see reg. 1(1)

Use of amounts set aside under the Local Government and Housing Act 1989I133

1

F15Subject to paragraph (4), any local authority—

a

whose credit ceiling on 31st March 2004, as determined under Part III of Schedule 3 to the Local Government and Housing Act 1989 (provisions supplementing Part IV – credit ceiling)49, was a negative amount; and

b

who was a debt-free authority on that date,

may treat F28the whole or part of the amount specified in paragraph (2) as if it were a capital receipt to which regulation 23 applies.

2

Subject to paragraph (3), the amount specified is the amount which was, on 31st March 2004, the amount set aside by the authority (whether voluntarily or pursuant to a requirement under Part IV of the Local Government and Housing Act 1989 (revenue accounts and capital finance of local authorities)) as provision to meet credit liabilities.

3

The amount specified in paragraph (2) shall not exceed the amount by which the local authority’s credit ceiling on 31st March 2004 was less than nil.

F564

Any decision to treat the whole or part of the amount specified in paragraph (2) as if it were a capital receipt, by virtue of paragraph (1), shall be made by the local authority before 1st October 2005.

5

Any amount treated as if it were a capital receipt, by virtue of paragraph (1), shall be treated as if it were received during the financial year beginning on 1st April 2004.

Loans to qualifying local government bodiesI2434

For the purposes of paragraph 4 of Schedule 1 (loans by parish councils and charter trustees) any local authority which is a local authority for the purposes of Part 1 or Schedule 1 is specified as a qualifying local government body.

Annotations:
Commencement Information
I24

Reg. 34 in force at 1.1.2004 for specified purposes and 1.4.2004 in so far as not already in force, see reg. 1(1)

Signed by authority of the First Secretary of State

Nick RaynsfordMinister of State,Office of the Deputy Prime Minister

F67F68F69SCHEDULECalculation of the sub-liability

Regulation 1(5)

Annotations:
Amendments (Textual)

1

1

This Schedule applies to capital receipts derived from dwellings disposed of by the local authority on or after 1 April 2012—

a

under Part V of the Housing Act 1985;

b

to a secure tenant for an amount that is less than the market value of the dwelling; or

c

by a grant of a shared ownership lease where—

i

a premium (which is a portion of the market value of the disposed dwelling) was paid and that portion exceeded 50% of the market value of the disposed dwelling; or

ii

within 2 years of the grant of the shared ownership lease, a premium is paid to acquire a further portion of the disposed dwelling so that the total portion of the market value of the disposed dwelling owned by the person is more than 50%.

2

This Schedule does not apply to capital receipts derived from the disposal of dwellings that are the subject of an agreement made under section 80B of the Local Government and Housing Act 1989.

2

In this Schedule—

  • “available buy back allowance” is an amount calculated in accordance with paragraph 3(2);

  • “assumed debt” means the amount of debt assumed to be associated with a local authority in a quarter as set out in column A of the table in this Schedule (“the Table”);

  • “attributable debt” means the amount of debt associated with a dwelling subject to the duty under section 74 of the Local Government and Housing Act 1989 (duty to keep a housing revenue account) set out in “the table of debt associated with HRA properties” dated 1st March 2012 which is published on the website of the Department for Communities and Local Government and deposited at the Department’s principal office

  • “buy back allowance” is an amount calculated in accordance with paragraph 3;

  • “local authority share cap” means the amount attributable to an authority set out in Column B of the Table;

  • “London authorities” means—

    1. i

      a London borough council; and

    2. ii

      the Common Council of the City of London;

  • “previous quarter” means the quarter before the relevant quarter except where the relevant quarter is quarter 1;

  • “quarter 1” means the period from 1st April to 30th June in a financial year;

  • “sub-liability” means the amount payable by the local authority to the Secretary of State under regulation 12;

  • “transaction cost” means in relation to—

    1. i

      London authorities, £2850:

    2. ii

      local authorities that are not London authorities, £1300.

3

1

The buy back allowance for the relevant quarter means (subject to paragraph 10) 50% of the relevant costs of buying back relevant interest in the relevant quarter where—

a

“relevant costs” means the expenditure incurred by the authority in the relevant quarter including administrative and incidental costs; and

b

“relevant interest” means a freehold or leasehold interest in a dwelling—

i

that has previously been disposed of by the authority, another authority, a new town corporation, a housing action trust or an urban development corporation;

ii

that was not acquired pursuant to a compulsory purchase order; and

iii

was not acquired from a body of persons corporate or unincorporate.

2

The available buy back allowance in respect of a relevant quarter is calculated as follows—

  • (buy back allowance for the previous quarter + buy back allowance for the relevant quarter) – available buy back allowance deducted in the previous quarter when calculating the sub-liability.

4

In this Schedule—

  • A means the total receipts received from the disposal of dwellings in the relevant quarter;

  • A* means the value of A in the previous quarter;

  • B means the total of the attributable debt associated with the dwellings disposed of during the relevant quarter;

  • C means the assumed debt for the relevant quarter;

  • D means the local authority share cap for the relevant quarter;

  • E means the total transaction cost calculated in accordance with paragraph 5;

  • E* means the total transaction cost for the previous quarter;

  • F has the meaning set out in paragraph 6;

  • F* means the figure for F in the previous quarter;

  • G has the meaning set out in paragraph 7;

  • G*means the figure for G in the previous quarter;

  • H means the transaction cost;

  • I means the number of disposals of dwellings during the relevant quarter;

  • J means deductible buy back allowance for the relevant quarter and is calculated in accordance with paragraph 8;

  • J* means the value of J in the previous quarter;

  • K means the sub-liability for the relevant quarter and is calculated in accordance with paragraph 9; and

  • K* means the value of K in the previous quarter.

5

E (the total transaction cost) means—

  • H×I.

6

F means—

  • B−C,

except where the amount is less than zero, in which case F means zero.

7

G means—

a

in the period of quarter 1—

  • D;

b

in quarters other than quarter 1—

  • (D+E*+F*+G*+J*+K*)−A*.

8

J means an amount of the available buy back allowance that does not exceed—

  • {A−[E+F+(3.398347729×G)]}×0.065.

9

Where—

a

A is less than or equal to E+F+(3.398347729×G) K means—

  • 0.705739353×[A−(E+F)]; and

b

i

A is more than E+F+(3.398347729×G) K means—

A−(E+F+G+J)

except where the value for K would be less than 2.398347729×G, in which case

ii

K means

2.398347729×G.

Transitional provision for calculating the buy back allowance10

1

An authority may treat the following amount as the buy back allowance for the previous quarter for the purpose of calculating the available buy back allowance for the quarter beginning on 1 April 2012—

  • 50% of (X-Y) where—

  • X is the total expenditure incurred by the authority buying a relevant interest in a dwelling between 1 April 2011 and 31 March 2012; and

  • Y is the 2011-2012 buy back reduction calculated under regulation 3(1)(b) of the Local Authorities (Capital Finance and Accounting) (England) (Amendment) (No.2) Regulations 2012.

2

The value of the available buy back allowance deducted in the previous quarter for the purpose of calculating the allowable buy back allowance for the quarter beginning on 1 April 2012 is zero.

3

In this paragraph “relevant interest” has the same meaning as in paragraph 3.

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(This note is not part of the Regulations)

These Regulations make provisions for capital finance and accounts under Part 1 of the Local Government Act 2003 (“the 2003 Act”). The capital finance provisions in and under Part IV of the Local Government and Housing Act 1989 (including the Local Authorities (Capital Finance) Regulations 1997) are repealed or revoked, as the case may be, on or before 1st April 2004 by virtue of the 2003 Act, with savings and transitional provisions (see the Local Government Act 2003 (Commencement No. 1 and Transitional Provisions and Savings) Order 2003).

These Regulations apply only in relation to local authorities in England. Some of the provisions do not apply in relation to parish councils and charter trustees (regulation 1).

Regulation 2 requires a local authority and the Mayor of London to have regard to the “Prudential Code for Capital Finance in Local Authorities” when determining, under section 3 of the 2003 Act, how much money they can afford to borrow.

Regulations 3 and 4 make provision excluding certain liabilities from the definition of “qualifying liabilities”, under section 7 of the 2003 Act, so that certain transactions are not credit arrangements.

Regulation 5 makes provision for varied transactions to be credit arrangements and regulation 6 sets out how the cost of credit arrangements are to be calculated.

Regulations 7 to 11 provide for certain sums received by a local authority to be treated, or not to be treated, as capital receipts.

Regulation 12 makes provision requiring a specified amount of capital receipts from disposals of housing land, other than qualifying disposals, to be paid to the Secretary of State. This is subject to certain reductions (regulations 14 to 21). Interest is payable (out of capital receipts) to the Secretary of State on late payments of the specified amount (regulation 13). Regulation 22 provides for the calculation of notional capital receipts where the consideration for a disposal of housing land does not consist wholly of money.

Regulation 23 provides that capital receipts may only be used for specified purposes.

In carrying out its capital finance functions, a local authority must have regard to the code of practice in “Treasury Management in the Public Services: Code of Practice and Cross-Sectoral Guidance Notes” (regulation 24).

Regulations 25 and 26 provide for expenditure which is, and which is not, to be treated as capital expenditure for the purposes of Chapter 1 of Part 1 of the 2003 Act.

Regulation 27 provides that local authorities must charge to a revenue account a minimum amount (“minimum revenue provision”), and may charge to a revenue account an additional amount, in respect of the financing of capital expenditure. The minimum revenue provision is calculated in accordance with regulations 28 to 29. Parish councils and charter trustees may charge to a revenue account any amount in respect of the financing of capital expenditure (regulation 27(2)).

Regulation 30 requires a local authority to charge to a revenue account for a financial year an amount equal to retirement benefits payments and contributions to pension funds payable for that year.

For the purposes of the definition of “proper practices” in section 21 of the 2003 Act, regulation 31 identifies certain documents that contain accounting practices.

Regulation 32 specifies certain levying bodies that are to be local authorities for the purposes of Part 1 of the 2003 Act.

Under regulation 33, a debt-free local authority with a negative credit ceiling on 31st March 2004, may use the amount, which on that date was the amount it set aside as provision to meet credit liabilities under the Local Government and Housing Act 1989, as if it were a capital receipt to which regulation 23 applies. The amount may not exceed the amount by which the authority’s credit ceiling was less than nil.

Any local authority which is a local authority for the purposes of Part 1 of, or Schedule 1 to, the 2003 Act is specified by regulation 34 as a qualifying local government body for the purposes of paragraph 4 of Schedule 1 (loans by parish councils and charter trustees).

The following documents may be obtained either by post from CIPFA, 3 Robert Street, London WC2N 6RL or from their website at www.cipfa.org.uk/shop:

a

The “Prudential Code for Capital Finance in Local Authorities”;

b

The “Treasury Management in the Public Services: Code of Practice and Cross-Sectoral Guidance Notes”;

c

“A Statement of Recommended Practice: Code of Practice on Local Authority Accounting in the United Kingdom”; and

d

“Best Value Accounting Code of Practice”.

“Governance and Accountability in Local Councils in England and Wales: A Practitioners' Guide 2003 Edition” may be obtained by post from the Society of Local Council Clerks, 1 The Crescent, Taunton, Somerset TA1 4EA.

The Item 8 Credit and Item 8 Debit (General) Determination 2003-2004 may be obtained by post from ODPM, Local Housing Authority Division, Zone 2/J3, Eland House, Bressenden Place, London SW1E 5DU.

A full regulatory impact assessment has not been produced for this instrument, as it has no impact on the costs of businesses, charities or voluntary bodies.