CFM97350 - Interest restriction: public infrastructure: qualifying public receipts

TIOPA10/S439(3)-(5)

For the purposes of the meaning of a qualifying old loan relationship, a qualifying infrastructure receipt of a company is:

  • any revenue receipt arising from a qualifying infrastructure activity carried on by the company; and
  • such proportion of the revenue receipts arising from qualifying infrastructure activities carried on by another company, so far as they are attributable to the company바카라 사이트™s interest in that other company (directly or indirectly) arising as a result of shares or loans.
Example 1

Company A owns all of the share capital in Company B, and Company B owns all of the share capital of Company C and Company D.

Both Company C and Company D hold PFI contracts with local authorities which generate qualifying infrastructure receipts which are considered highly predictable from 12 May 2016 for approximately 30 years.

Company B바카라 사이트™s only assets are the shares in Company C and Company D, and a loan to Company D. Its income, therefore, is limited to dividends and interest receivable from its subsidiaries. It is a QIC.

For the purpose of determining whether Company B has a qualifying infrastructure receipt, both the returns from the holding in Company D바카라 사이트™s issued loan notes, and Company C and Company D바카라 사이트™s shares are considered, so far as the underlying activity of the companies constitute a qualifying infrastructure activity generating qualifying infrastructure receipts. In this example, all the activity of Company C and Company D are considered generating qualifying infrastructure receipts, and as such all Company C and Company D바카라 사이트™s interest and dividends are considered qualifying infrastructure receipts.

Company A바카라 사이트™s only assets are the shares in, and a loan to, Company B. As noted, neither Company A nor Company B are considered to undertake a qualifying infrastructure activity. In order to determine whether Company A바카라 사이트™s dividend receipts and interest receivable are qualifying infrastructure receipts it must consider the activities of Company B바카라 사이트™s investments, Company C and Company D. In this example it would conclude, as Company B does, that its dividend receipts and interest receivable are qualifying infrastructure receipts by reference to Company C and Company D바카라 사이트™s qualifying infrastructure activity.

Example 2

Company A, owns 95% of the share capital in Company C and itself has a wholly owned subsidiary Company B (these are its only assets). Company X, an unrelated party, owns the other 5% of Company C바카라 사이트™s shares and has provided it with a loan.

Company C holds a PFI contract with a local authority which generates qualifying infrastructure receipts which are considered highly predictable from 12 May 2016 for approximately 30 years.

As in the previous example, Company A will have qualifying infrastructure receipts by virtue of dividends from Company C. Its dividend receipts from Company B will not be qualifying infrastructure receipts. In order to determine the relative value of Company A바카라 사이트™s qualifying infrastructure receipts, it will have to consider the present value of its forecast cash flows (dividends) from both Company B and Company C, as at 12 May 2016 for the qualifying period.