»Ê¹ÚÌåÓýapp

A private sector operator enters into a contract with a public sector purchaser, the Secretary of State for Transport, to be granted a right to operate a toll road for 25 years. As a precondition of being granted the right, the operator is required to design and build the road on the purchaser’s land. »Ê¹ÚÌåÓýapp land, including the completed road, belongs to the Secretary of State throughout the period of the contract. »Ê¹ÚÌåÓýapp Secretary of State grants a right of access to enable the operator to do no more than go on to the land to provide the construction and maintenance services, and operate the toll road.

»Ê¹ÚÌåÓýapp operator’s trade is operating a toll road. »Ê¹ÚÌåÓýapp operator is not carrying on a property business, the profits are chargeable to tax as trade profits (see BIM15070).

For tax purposes, the cost of building the road is capital expenditure on the acquisition of a fixed capital asset of the operator’s trade, i.e. the right to charge tolls on road users. »Ê¹ÚÌåÓýapp accounting treatment is of limited assistance in determining the scope of the PFI trade. If FRS5 Application note F is applicable, ownership of the road may not be reflected in its accounting treatment, i.e. it may be reported as either a financial asset or a fixed asset on the balance sheet (see BIM64070 onwards).

See also BIM64035.