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(b) “the relevant period of account” means the period of account
mentioned in subsection (1).

(3) The financial statements of the principal worldwide group for the
relevant period of account are treated as if—

(a) 5no relevant income amounts were recognised in them, as
items of profit or loss, so far as they relate to financial
liabilities owed to any member of the principal worldwide
group by any member of an associated worldwide group,
and

(b) 10no amounts were recognised in them, as items of profits or
loss, in respect of any profit or loss attributable to an interest
held by any member of the principal worldwide group in any
member of an associated worldwide group

(4) The adjusted net group-interest expense of the principal worldwide
15group for the relevant period of account is treated as increased by the
appropriate proportion of the adjusted net group-interest expense
for the period of each associated worldwide group.

(5) The qualifying net group-interest expense of the principal
worldwide group for the relevant period of account is treated as
20increased by the appropriate proportion of the qualifying net group-
interest expense for the period of each associated worldwide group.

(6) The group-EBITDA of the principal worldwide group for the
relevant period of account is treated as increased by the appropriate
proportion of the group-EBITDA of each associated worldwide
25group for the period.

(7) In this section “the appropriate proportion”, in relation to an
associated worldwide group means the proportion of the profits or
losses of the associated worldwide group arising in the relevant
period of account to which the principal worldwide group is
30entitled.

428 Section 427: associated worldwide groups

(1) This section has effect for the purposes of section 427 and this section.

(2) “Associated worldwide group” means the worldwide group of
which a specified non-consolidated associate is the ultimate parent.

(3) 35Where (apart from this subsection) a specified non-consolidated
associate does not fall within section 473(1)(a) (conditions for being
the ultimate parent of a worldwide group), it is treated as if it did fall
within that provision.

(4) Where (apart from this subsection) financial statements of an
40associated worldwide group are not drawn up in respect of the
relevant period of account, IAS financial statements of the associated
worldwide group are treated as having been drawn up in respect of
that period.

(5) The associated worldwide group’s financial statements for the
45relevant period of account are treated as if no relevant expense
amounts were recognised in them, as items of profit or loss, so far as
they relate to financial liabilities owed to any member of the

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principal worldwide group by any member of the associated
worldwide group.

(6) The reference in section 427(6) to profits or losses of the associated
worldwide group to which the principal worldwide group is entitled
5does not include any profits or losses that relate to times when the
non-consolidated associate is a member of the principal worldwide
group.

(7) Subsection (8) has effect in the application of this Part (for the
purposes mentioned in subsection (1)) in relation to the financial
10statements of an associated worldwide group for the relevant period
of account.

(8) The associated worldwide group is treated—

(a) as having made an interest allowance (alternative
calculation) election if and only if such an election has effect
15in relation to the relevant period of account of the principal
worldwide group, and

(b) as not having made any other election under this Part.

(9) In this section “specified” means specified in the interest allowance
(non-consolidated investment) election.

429 20Meaning of “non-consolidated associate”

(1) An entity is a “non-consolidated associate” of a worldwide group, in
relation to a period of account of the group (“the relevant period of
account”) if condition A, B or C is met.

(2) Condition A is that the entity is accounted for in the financial
25statements of the group for the relevant period of account—

(a) as a joint venture or an associate, and

(b) using the gross equity method or the equity method.

(3) Condition B is that—

(a) the entity is a partnership, and

(b) 30an interest allowance (consolidated partnership) election has
effect in relation to the relevant period of account.

(4) Condition C is the entity is a non-consolidated subsidiary of the
ultimate parent at any time during the relevant period of account.

(5) In this section the following expressions have the meaning they have
35for accounting purposes—

  • “associate”;

  • “equity method”;

  • “gross equity method”;

  • “joint venture”.

(6) 40In this section “entity” includes anything which is treated as an entity
in the financial statements of the worldwide group (regardless of
whether it has a legal personality as a body corporate).

(7) This section has effect for the purposes of this Part.

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Effect of interest allowance (consolidated partnerships) election
430 Interest allowance (consolidated partnerships) election

(1) Where an interest allowance (consolidated partnerships) election
(see paragraph 18 of Schedule 7A) has effect in relation to a period of
5account of a worldwide group, this Chapter applies in relation to the
period subject to this section.

(2) The financial statements of the group for the period are treated as
if—

(a) no amounts were recognised in them, as items of profit or
10loss, in respect of any income or expenses of a specified
consolidated partnership, and

(b) instead, each specified consolidated partnership were
accounted for using the equity method.

(3) In subsection (2)(b) “the equity method” has the meaning it has for
15accounting purposes.

(4) In this Part “consolidated partnership”, in relation to a period of
account of a worldwide group, means a partnership in relation to
which conditions A and B are met.

(5) Condition A is that, in the financial statements of the worldwide
20group for the period, the results of the partnership are consolidated
with those of the ultimate parent as the results of a single economic
entity.

(6) Condition B is that at no time during the period does the partnership
have a subsidiary that is a company.

(7) 25In this section—

(a) “specified” means specified in the interest allowance
(consolidated partnerships) election or elections;

(b) “subsidiary” has the meaning given by international
accounting standards.

30Interpretation
431 Interpretation of Chapter

In this Chapter the following expressions have the meaning they
have for accounting purposes—

  • “item of profit or loss”;

  • 35“item of other comprehensive income”.

CHAPTER 8 Public infrastructure
Overview
432 Overview of Chapter

(1) 40This Chapter —

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(a) alters the way in which this Part has effect in relation to
companies (referred to as “qualifying infrastructure
companies”) that are fully taxed in the United Kingdom, and

(b) operates by reference to the provision of public infrastructure
5assets or the carrying on of certain other related activities.

(2) In addition to the requirement for the company to be fully taxed in
the United Kingdom, the qualifying requirements are—

(a) a requirement designed to ensure that the company’s income
and assets are referable to activities in relation to public
10infrastructure assets, and

(b) a requirement for the company to make an election (which
may be revoked, subject to a 5-year rule in relation to the
revocation and the ability to make a fresh election).

(3) Two different types of asset meet the definition of a “public
15infrastructure asset”, namely—

(a) tangible assets forming part of the infrastructure of the
United Kingdom (or the UK sector of the continental shelf)
that meet a public benefit test, and

(b) buildings (or parts of buildings) that are part of a UK
20property business and are let (or sub-let) on a short-term
basis to unrelated parties.

(4) In either case an asset counts as a public infrastructure asset only if—

(a) it has had, has or is likely to have an expected economic life
of at least 10 years, and

(b) 25it is shown in a balance sheet of a member of the group that
is fully taxed in the United Kingdom.

(5) The detail of the above tests is set out in sections 433 to 437.

(6) The substantive rules provide that an amount does not count as a
tax-interest expense amount if—

(a) 30the creditor in relation to the amount is an unrelated party or
another qualifying infrastructure company or the amount is
in respect of a loan relationship entered into on or before 12
May 2016 (see sections 438 and 439), and

(b) the recourse of the creditor in relation to the amount is
35limited to the income or assets of, or shares in or debt issued
by, a qualifying infrastructure company (ignoring certain
financial assistance and certain non-financial guarantees).

(7) In addition—

(a) provision is made for adjusting the operation of this Part to
40take into account the effect of the above rules (for example,
the tax-EBITDA of a qualifying infrastructure company is
treated as nil (see section 441)),

(b) provision is made modifying the operation of this Chapter in
the case of joint venture companies or partnerships or other
45transparent entities (see sections 444 to 447), and

(c) provision is made in relation to the decommissioning of a
public infrastructure asset (see section 448).

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Key concepts
433 Meaning of “qualifying infrastructure company”

(1) For the purposes of this Chapter a company is a “qualifying
infrastructure company” throughout an accounting period if—

(a) 5it meets the public infrastructure income test for the
accounting period (see subsections (2) to (4)),

(b) it meets the public infrastructure assets test for the
accounting period (see subsections (5) to (10)),

(c) it is fully taxed in the United Kingdom in the accounting
10period (see subsection (11)), and

(d) it has made an election for the purposes of this section that
has effect for the accounting period (see section 434).

(2) A company meets the public infrastructure income test for an
accounting period if all, or all but an insignificant proportion, of its
15income for the accounting period derives from—

(a) qualifying infrastructure activities carried on by the company
(see sections 436 and 437),

(b) shares in a qualifying infrastructure company, or

(c) loan relationships or other financing arrangements to which
20the only other party is a qualifying infrastructure company.

(3) A company also meets the public infrastructure income test for an
accounting period if it has no income for the period.

(4) In determining whether the public infrastructure income test for an
accounting period is met, income which does not derive from any of
25the matters mentioned in subsection (2)(a) to (c) is ignored if, having
regard to all the circumstances, it is reasonable to regard the amount
of the income as insignificant.

(5) A company meets the public infrastructure assets test for an
accounting period if all, or all but an insignificant proportion, of the
30total value of the company’s assets recognised in an appropriate
balance sheet on each day in that period derives from—

(a) tangible assets that are related to qualifying infrastructure
activities,

(b) service concession arrangements in respect of assets that are
35related to qualifying infrastructure activities,

(c) financial assets to which the company is a party for the
purpose of the carrying on of qualifying infrastructure
activities by the company or another associated qualifying
infrastructure company,

(d) 40shares in a qualifying infrastructure company, or

(e) loan relationships or other financing arrangements to which
the only other party is a qualifying infrastructure company.

(6) If a company has no assets recognised in an appropriate balance
sheet on any day in an accounting period, the company is to be taken
45as meeting the public infrastructure assets test in respect of that day.

(7) In determining whether the public infrastructure assets test for an
accounting period is met in respect of any day, the value of an asset
which does not derive from any of the matters mentioned in

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subsection (5)(a) to (e) is ignored if, having regard to all the
circumstances, it is reasonable to regard the value of the asset as
insignificant.

(8) For the purposes of subsection (5)(a) and (b) assets are “related to
5qualifying infrastructure activities” in the case of a company if the
assets are—

(a) public infrastructure assets (see section 436(2) and (5)) in
relation to the company that are provided by the company, or

(b) other assets used in the course of a qualifying infrastructure
10activity carried on by the company or by an associated
qualifying infrastructure company.

(9) For the purposes of this section the reference to the value of an asset
recognised in an appropriate balance sheet of a company on a day is
to the value which is, or would be, recognised in a balance sheet of
15the company drawn up on that day.

(10) A company is not to be taken as failing to meet the public
infrastructure assets test for an accounting period if, ignoring this
subsection, that test would have been failed on a particular day or
days merely as a result of particular circumstances—

(a) 20which existed, and

(b) which were always intended to exist,

for a temporary period of an insignificant duration.

(11) A company is fully taxed in the United Kingdom in an accounting
period if—

(a) 25every activity that the company carries on at any time in the
accounting period is within the charge to corporation tax,

(b) the company has not made an election under section 18A of
CTA 2009 (exemption for profits or losses of foreign
permanent establishments) that has effect for the accounting
30period, and

(c) the company has not made a claim for relief under Chapter 2
of Part 2 (double taxation relief) for the accounting period.

434 Elections under section 433

(1) An election under section 433

(a) 35must be made before the beginning of the accounting period
in relation to which it is to have effect, and

(b) has effect in relation to that accounting period and all
subsequent accounting periods (subject to subsections (2) to
(4)).

(2) 40An election under section 433 may be revoked.

(3) A revocation of an election under section 433

(a) must be made before the beginning of the accounting period
from which the revocation is to have effect, but

(b) cannot have effect in relation to any accounting period that
45begins before the end of the period of 5 years beginning with
the first day of the first accounting period in relation to which
the election had effect.

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(4) Once revoked, a fresh election may be made under section 433 but
cannot have effect in relation to any accounting period that begins
before the end of the period of 5 years beginning with the first day of
the accounting period from which the revocation had effect.

(5) 5If—

(a) a qualifying infrastructure company transfers to another
company a business, or a part of a business, that consists of
the carrying on of qualifying infrastructure activities, and

(b) the transferee has not made an election under section 433 that
10has effect for the accounting period in which the transfer
takes place,

the transferee is to be treated as if it had made the election under that
section that the transferor had made.

(6) If a company has made an election under section 433 that has effect
15in relation to an accounting period, the company—

(a) may not make an election under section 18A of CTA 2009 that
has effect for the accounting period, and

(b) may not make a claim for relief under Chapter 2 of Part 2 for
the accounting period.

435 20Group elections modifying the operation of sections 433 and 434

(1) Two or more companies which are members of the same worldwide
group may jointly make an election under this section modifying the
operation of sections 433 and 434 in relation to them for the times
during which they remain members of that group.

(2) 25An election under this section—

(a) has effect from a date specified in the election;

(b) may be revoked jointly by the members of the group in
relation to which the election has effect from a date specified
in the revocation;

(c) 30ceases to have effect in relation to a company which gives a
notice to an officer of Revenue and Customs, and to the
companies in relation to which the election has effect,
notifying them of its withdrawal from the election from a
date specified in the notice.

(3) 35A date specified in an election, revocation or notice may not be before
the date on which it is made or given.

(4) An election under this section which has effect at particular times
(“relevant times”) in relation to particular companies (“elected
companies”) modifies the operation of sections 433 and 434 as
40follows.

(5) If an elected company (“C”) has made an election under section 433
which has effect for an accounting period that includes relevant
times, that section has effect as if, in determining whether anything
is insignificant for the purposes of section 433(2), (4), (5) or (7), C also
45had the income and assets that the other elected companies had at
those times.

(6) If—

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(a) an elected company (“C”) has made an election under section
433 which has effect for an accounting period including
relevant times, and

(b) C fails to meet one or more of the tests in subsection (1)(a) to
5(c) of that section in relation to that accounting period
otherwise than as a result of this subsection,

all the other elected companies are also treated as failing to meeting
those tests for so much of their accounting periods as consists of the
relevant times in the accounting period of C.

(7) 10If, in a case where subsection (6) applies, the deemed failed period
does not coincide with an accounting period of another elected
company (“E”), the accounting period of E is treated for the purposes
of this Part as if it consisted of separate accounting periods beginning
and ending at such times as secure that none of the separate
15accounting periods fall partly within the deemed failed period.

(8) For this purpose “the deemed failed period” means the period
consisting of the relevant times in the accounting period of C
mentioned in subsection (6).

(9) All such apportionments as are necessary for the purposes of, or in
20consequence of, subsections (5) to (7) are to be made on a just and
reasonable basis.

(10) If—

(a) elected companies have made elections under section 433
which have effect for accounting periods including relevant
25times, and

(b) more than half of those elected companies have each made an
election under that section that has had effect for a period of
at least 5 years,

section 434(3)(b) does not apply in relation to any of the elected
30companies.

436 Meaning of “qualifying infrastructure activity”

(1) For the purposes of this Chapter a company carries on a “qualifying
infrastructure activity” if the company—

(a) provides an asset that is a public infrastructure asset in
35relation to it (see subsections (2) and (5)), or

(b) carries on any other activity that is ancillary to, or facilitates,
the provision of an asset that is a public infrastructure asset
in relation to it.

(2) For the purposes of this Chapter an asset is a “public infrastructure
40asset” in relation to a company at any time if—

(a) the asset is, or is to be, a tangible asset forming part of the
infrastructure of the United Kingdom or the UK sector of the
continental shelf,

(b) the asset meets the public benefit test (see subsections (3) and
45(4)),

(c) the asset has had, has or is likely to have an expected
economic life of at least 10 years, and

(d) the asset meets the group balance sheet test (see subsection
(10)) in relation to the company.

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(3) An asset meets the “public benefit test” if—

(a) the asset is, or is to be, procured by a relevant public body, or

(b) the asset is, or is to be, used in the course of a regulated
activity.

(4) 5An asset is used in the course of a “regulated activity” if its use—

(a) is regulated by an infrastructure authority (see section
437(2)), or

(b) could be regulated by an infrastructure authority if the
authority exercised any of its powers.

(5) 10For the purposes of this Chapter a building, or part of a building, is
also a “public infrastructure asset” in relation to a company at any
time if—

(a) the company, or another member of the worldwide group of
which it is a member at that time, carries on a UK property
15business consisting of or including the building or part,

(b) the building or part is, or is to be, let on a short-term basis to
persons who, at that time, are not related parties of the
company or member,

(c) the building or part has had, has or is likely to have an
20expected economic life of at least 10 years, and

(d) the building or part meets the group balance sheet test in
relation to the company.

(6) A building, or part of a building, is “let” to a person if the person is
entitled to the use of the building or part under a lease or other
25arrangement.

(7) A building, or part of a building, is let on a “short-term basis” if the
lease or other arrangement in question—

(a) has an effective duration which is 50 years or less, and

(b) is not an arrangement to which any provision of Chapter 2 of
30Part 16 of CTA 2010 applies (finance arrangements).

(8) Whether or not a lease or other arrangement has an effective
duration which is 50 years or less is determined in accordance with
Chapter 4 of Part 4 of CTA 2009 (reading any reference to a lease as
a reference to a lease or other arrangement within subsection (6)).

(9) 35For the purposes of this section references to a building or part of a
building being let include the building or part being sub-let, and,
accordingly, references to a lease include a sub-lease.

(10) An asset meets the “group balance sheet test” in relation to a
company at any time if—

(a) 40an entry in respect of the asset is, or would be, recognised
(whether as a tangible asset or otherwise) in a balance sheet
of the company, or an associated company, that is drawn up
at that time, and

(b) the company or associated company is within the charge to
45corporation tax at that time in respect of all of its sources of
income and no election or claim mentioned in section
433(11)(b) or (c) has effect for a period including that time.

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(11) For the purposes of this Chapter references to provision, in relation
to a public infrastructure asset, include its acquisition, design,
construction, conversion, improvement, operation or repair.

437 Section 436: supplementary

(1) 5In section 436 “infrastructure” includes—

(a) water, electricity, gas, telecommunications or sewerage
facilities,

(b) oil pipelines, oil terminals or oil refineries,

(c) railway facilities (including rolling stock), roads or other
10transport facilities,

(d) health or educational facilities,

(e) facilities or housing accommodation provided for use by
members of any of the armed forces or of any police force,

(f) court or prison facilities,

(g) 15waste processing facilities, and

(h) buildings (or parts of buildings) occupied by any relevant
public body.

(2) Each of the following is an “infrastructure authority” for the
purposes of section 436(4)

(a) 20the Civil Aviation Authority so far as exercising functions in
relation to the provision of airports (within the meaning of
the Airports Act 1986),

(b) each of the following so far as exercising functions in relation
to waste processing—

(i) 25the Environment Agency,

(ii) the Scottish Environmental Protection Agency,

(iii) the Northern Ireland Environment Agency, or

(iv) Natural Resources Wales,

(c) the Gas and Electricity Markets Authority,

(d) 30each of the following so far as exercising functions in relation
to the management of ports or harbours—

(i) a harbour authority within the meaning of the
Harbours Act 1964, or

(ii) a harbour authority within the meaning of the
35Harbours Act (Northern Ireland) 1970,

(e) the Northern Ireland Authority for Utility Regulation,

(f) the Office of Communications so far as exercising functions
in relation to the provision of electronic communication
services (within the meaning of the Communications Act
402003) or the management of the radio spectrum,

(g) the Office of Nuclear Regulation,

(h) the Office of Rail and Road,

(i) the Oil and Gas Authority,

(j) the Water Services Regulation Authority or the Water
45Industry Commission for Scotland, or

(k) any other public authority which has functions of a
regulatory nature exercisable in relation to the use of tangible
assets forming part of the infrastructure of the United
Kingdom or the UK sector of the continental shelf.