Local Authorities (Capital Finance) Regulations 1990
| Jurisdiction | UK Non-devolved |
| Citation | SI 1990/432 |
1990 No. 432
LOCAL GOVERNMENT, ENGLAND AND WALES
The Local Authorities (Capital Finance) Regulations 1990
Made 2nd March 1990
Laid before Parliament 9th March 1990
Coming into force 1st April 1990
The Secretary of State for the Environment, as respects England, and the Secretary of State for Wales, as respects Wales, in exercise of the powers conferred on them by sections 40(5), 42(4), 48(5), 49(3), 51(7), 57(1)(c), 58(4)(b) and (9), 59(3) to (5), 61(4), 66(6), 190 and 191(1) of, and paragraphs 7(3), 8, 10, 11(2), 15(1)(a), 16(1)(a), 17, 18(1) and 20 of Schedule 3 to, the Local Government and Housing Act 19891, and of all other powers enabling them in that behalf, hereby make the following Regulations:
PART I
GENERAL
Citation, commencement and interpretation
1.—(1) These Regulations may be cited as the Local Authorities (Capital Finance) Regulations 1990 and shall come into force on 1st April 1990.
(2) In these Regulations, “the Act” means the Local Government and Housing Act 1989; and except where the context otherwise requires any reference in these Regulations to a section is a reference to a section of the Act.
PART II
EXPENDITURE FOR CAPITAL PURPOSES
Expenditure to be expenditure for capital purposes
2.—(1) Expenditure incurred by a local authority in the issue of a relevant loan instrument shall be expenditure for capital purposes.
(2) In paragraph (1) above, a “relevant loan instrument” means a loan instrument issued in relation to any loan other than a loan in respect of which all payments or repayments by the authority are to be made not later than one year after the loan instrument is issued.
Expenditure not to be expenditure for capital purposes
3. Expenditure by a local authority pursuant to section 112 of the Local Government Act 19722on the making of advances, grants or other financial assistance to an officer of the authority or to a person whom the authority intend to appoint as an officer shall not be expenditure for capital purposes.
PART III
CHARGE OF EXPENDITURE TO REVENUE ACCOUNTS
Expenditure excluded from section 41(1)
4. Expenditure in respect of which a local authority have made a determination under section 42(2)(g) shall not be expenditure falling within section 42(2) where the expenditure is, or is to be, met out of a contribution made, or to be made, under section 516(1) of the Housing Act 19853and the contribution is, or is to be, paid–
(a) in annual sums payable in respect of a period of ten years or more; or
(b) by way of commuted payments within the meaning of section 157.
PART IV
CREDIT ARRANGEMENTS
Interpretation
5.—(1) In this Part, references to the capital cost of a lease are references to the amount which, at the time a local authority become the lessees, the authority estimate will be the aggregate of–
(a)
(a) any consideration which has been or falls to be given by the authority in respect of the lease before or during the financial year in which they become the lessees; and
(b)
(b) the value of any consideration which falls to be given by the authority in respect of the lease in any subsequent financial year.
(2) For each subsequent financial year referred to in paragraph (1)(b) above, the value of the consideration falling to be given in that year shall be determined by the formula–
where–
“x” is the amount of the consideration which the authority estimate will be given by them in respect of the lease in that financial year;
“r” is the percentage rate of discount prescribed for the financial year in which the authority became the lessees by regulations made by the Secretary of State for the purposes of section 49; and
“n” is the financial year in which the consideration falls to be given expressed as a year subsequent to the financial year in which the authority became the lessees (so that the first of the subsequent financial years is 1, the next financial year is 2, and so on).
(3) For the purposes of this regulation, and the following provisions of this Part, in any case where the consideration in respect of a lease consists, in whole or in part,–
(a)
(a) of an undertaking to do or to refrain from doing something at a future time (whether specified or not), or
(b)
(b) of a right to do or to refrain from doing something at such a future time,
that consideration shall be regarded as neither given nor received until the undertaking is performed or, as the case may be, the right is exercised.
Leases and contracts which are not credit arrangements
6.—(1) A lease is excluded from section 48 if–
(a)
(a) at the time the local authority become the lessees, they estimate that the consideration which has been or falls to be given by them in respect of the lease at or before that time, or within one year thereafter, is not less than 90 per cent. of the capital cost of the lease;
(b)
(b) it is an operating lease of any vehicle, vessel, plant, machinery or apparatus;
(c)
(c) the local authority become the lessees by virtue of an order made under section 168 of the Education Reform Act 19884;
(d)
(d) it is a lease of land which is part of the housing stock of a new town corporation; or
(e)
(e) it is granted to the local authority in accordance with regulations made under section 100 of the Housing Act 19885.
(2) For the purposes of paragraph (1)(b) above, an operating lease of any vehicle, vessel, plant, machinery or apparatus (“the asset”) is any lease where–
(a)
(a) the lease or any arrangement (whether a credit arrangement or not) entered into in connection with the lease does not provide or do not together provide for–
(i) the property in the asset to transfer to the local authority under the lease or arrangement or any renewal or continuation of the lease or arrangement; or
(ii) the renewal or continuation of the lease or arrangement for a further period for a consideration which is materially less than what would be regarded, on the date on which the authority become the lessees or, if earlier, the arrangement is made (“the commencement date”) as the open market rent for that further period; or
(iii) the value of the asset at the time of the expiry or termination of the lease or arrangement or of the period of any renewal or continuation of the lease or arrangement to accrue directly or indirectly to the authority; and
(b)
(b) the termination value of the asset is equal to or exceeds 10 per cent. of its value on the commencement date.
(3) In paragraph (2)(b) above, “termination value” means the value, as estimated by the authority on the commencement date, of the asset on the date on which the lease or arrangement is due to expire or terminate or, where provision is made for the renewal or continuation of the lease or arrangement, on the latest date on which it would expire or terminate if any right to renew or continue it were exercised.
(4) A contract is excluded from section 48 if–
(a)
(a) it is a contract entered into by a local authority and a new town corporation which–
(i) provides for the transfer to the authority of all or part of the housing stock of a new town corporation; and
(ii) is entered into by the new town corporation by virtue of section 36 of the New Towns Act 19816or in accordance with regulations made under section 172(1);
(b)
(b) it would not constitute a credit arrangement were the authority to make the estimate required by section 48(1)(b) in respect of each relevant financial year leaving out of account an amount of consideration equal to three per cent. of the value of all the consideration which has been or falls to be given under the contract by the authority; and, for this purpose, a “relevant financial year” is any relevant financial year (within the meaning of section 48(1)(b)) up to and including the last financial year during which the authority are to receive any consideration under the contract and the immediately following financial year; or
(c)
(c) it is a licensing contract.
(5) For the purposes of paragraph (4)(c) above, a licensing contract is any contract under which–
(a)
(a) the construction or enhancement of a dwelling or the provision of a dwelling by the conversion of a building or part of a building is carried out for a local authority on land the freehold of which or a leasehold interest in which is owned by the authority; and
(b)
(b) the authority are required, after the carrying out of the works,–
(i) to dispose of the freehold or grant a long lease of the dwelling to a person other than a public body or a company which, for the purposes of Part V of the Act (companies in which local authorities have interests), is under the control or subject to the influence of a local authority, or
(ii) to grant a shared ownership lease of the dwelling.
(6) In paragraph (5) above,–
“dwelling” means any building or part of a building which is occupied as a dwelling or which is a hostel providing accommodation for persons who are homeless within the meaning of Part III of the Housing Act 1985 (housing the homeless) or who have a special need for accommodation arising from physical or mental disability, age, infirmity, or other special social disability or disadvantage;
“long lease” means a lease creating a long tenancy within the meaning of section 115 of the Housing Act 1985;
“shared ownership lease” means a lease granted at a premium, calculated by reference to the value of the dwelling or the cost of providing it, of not less than 25 per cent. of the figure by reference to which it was calculated;
“public body” means a local authority, a new town corporation or an urban development corporation established under Part XVI of the Local...
To continue reading
Request your trial