# The Local Authorities (Capital Finance) (Amendment No. 3) Regulations 1996, Note: Explanatory note


(This note is not part of the Regulations)
These Regulations further amend the Local Authorities (Capital Finance) Regulations 1990 for purposes connected with the Private Finance Initiative.
Regulation 4 makes provision in respect of the initial cost of a credit arrangement which is a transaction (“a relevant transaction”) of one of three specified descriptions, or is one of two or more arrangements which, taken together, constitute such a transaction. If specified conditions are met, the initial cost of such a credit arrangement will be either nil or reduced. The first transaction described (the new regulation 7C) is for the provision of any asset (including land). The second (the new regulation 7D) is for the provision of a building or of works on a building. The third (the new regulation 7E) is for the provision of a building.
The main features of a relevant transaction are that —
(a) it involves the provision of services required for the maintenance and repair of the asset or building concerned;
(b) if it is for the provision of land or a building or works on a building, the land or building is not for use for housing purposes;
(c) the consideration given by the authority includes the payment of fees by instalments, and the first instalment does not fall to be paid until after the authority have begun to use the asset or building concerned; and
(d) the amount of fees payable depends on standards attained in the performance of the services or the extent, rate or intensity of use of the asset or building concerned for its intended purpose.
The provision made in regulation 3 takes account of the fact that a credit arrangement falling within the provisions in regulation 4 may be a lease.
Regulation 5 makes provision for cases where the consideration given by a local authority under a relevant transaction includes a disposal of an interest in an asset. In the case of the non-monetary consideration received for the disposal, the reserved part of the notional capital receipt is nil.
Regulation 6 provides that, in determining a local authority’s credit ceiling, no account is to be taken of a credit arrangement if —
(a) a supplementary credit approval has been issued for the purposes only of the arrangement;
(b) the arrangement would, under specified circumstances, (which relate to one of the provisions in regulation 4) have an initial cost of nil; and
(c) the authority’s credit ceiling, as determined under Schedule 3 to the Local Government and Housing Act 1989, is nil or a negative amount at the beginning of the financial year in which the arrangement is entered into, and the authority (subject to specified exceptions) have no money outstanding by way of borrowing.

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Source: https://www.legislation.gov.uk/uksi/1996/2539/note (the official version)
Page: https://openlegislation.uk/local-authorities-capital-finance-amendment-no-3-regulations-1996/note
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.