Explanatory note

The Local Authorities (Capital Finance and Accounting) (England) Regulations 2003 (the “2003 Regulations”) make provision for capital finance and accounts under Part 1 of the Local Government Act 2003 (“the 2003 Act”). Regulation 25 of the 2003 Regulations provides 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. Since 2004, regulation 25 has excluded local authority investments in money market funds from treatment as capital expenditure in local authority accounts. Regulation 30K of the 2003 Regulation provides for specific accounting treatment for fair value gains and losses of local authority investments in pooled investment funds, including money market funds.

Regulation 5 of the Local Government (Miscellaneous Amendments) (EU Exit) Regulations 2018 (“the 2018 EU Exit Regulations”) changed the definition of “money market funds” within the 2003 Regulations with effect from exit day as defined in the European Union (Withdrawal) Act 2018.

These Regulations amend the 2003 Regulations further. These Regulations are to come into force on the same date at which regulation 5 of the 2018 EU Exit Regulations comes into force.

Regulation 3 amends regulation 1 of the 2003 Regulations to introduce new definitions of “EEA UCITS”, “relevant commencement date”, “relevant period”, “relevant UCITS”, “sub-fund”, “UCITS”, and “UK UCITS” for the purposes of the 2003 Regulations.

Regulation 4 amends regulation 25 of the 2003 Regulations to provide that local authority investments in certain collective investment schemes (“UCITS”) shall not be treated as capital expenditure within local authority accounts. A reference to Part 4 of the Finance Act 2006 in relation to Real Estate Investment Trusts is also updated.

Regulation 5 amends regulation 30K of the 2003 Regulations to include “relevant UCITS” within the categories of investments which constitute “pooled investment funds” for the purposes of regulation 30K, and to ensure that only those money market funds which are UCITS constitute “pooled investment funds”. Regulation 30K requires that, in certain circumstances outlined within that regulation, any fluctuation in the fair value of a local authority’s investment in a pooled investment fund must not be charged to that local authority’s revenue account, but should be recorded in a separate account established and usable solely for that purpose.

A full regulatory impact assessment has not been produced for this instrument as no impact on the private or voluntary sectors is foreseen.