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(3) The Commissioners may by regulations amend the definition of
“infrastructure authority”.

Exemption and related provision
438 Exemption for interest payable to third parties etc

(1) 5Amounts that arise to a qualifying infrastructure company in a
relevant accounting period are not to be regarded for the purposes of
this Part as tax-interest expense amounts of the company so far as
they qualify as exempt amounts in that period (see subsections (2)
and (3)).

(2) 10An amount qualifies as an exempt amount so far as it is attributable,
on a just and reasonable apportionment, to the times in the relevant
accounting period when—

(a) each creditor in relation to the amount is within subsection
(3) or the amount is in respect of a qualifying old loan
15relationship (see section 439), and

(b) the recourse of each creditor in relation to the amount is
limited to relevant infrastructure matters (see subsections (4)
to (6)).

(3) A creditor is within this subsection if—

(a) 20the creditor is not a related party of the company, or

(b) the creditor is a company which is a qualifying infrastructure
company,

but section 466(2) does not apply for the purposes of paragraph (a).

(4) The recourse of a creditor is limited to relevant infrastructure matters
25if, in the event that the company fails to perform its obligations in
question, the recourse of the creditor is limited to—

(a) income of a qualifying infrastructure company,

(b) assets of a qualifying infrastructure company, or

(c) shares in or debt issued by a qualifying infrastructure
30company,

whether the income, assets, shares or debt relate to the company
concerned or another qualifying infrastructure company.

(5) For the purposes of subsection (4) a guarantee, indemnity or other
financial assistance in favour of the creditor is ignored if—

(a) 35it is provided before 1 April 2017, or

(b) it is provided at any later time by a person who, at that time,
is not a related party of the company or is a relevant public
body.

(6) For the purposes of subsection (4) a non-financial guarantee in
40favour of the creditor is ignored if—

(a) it guarantees the performance by any person of contractual
obligations to provide goods or services to a qualifying
infrastructure company,

(b) it is given by the person providing the goods or services or by
45a person who is a related party of that person, and

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(c) the maximum amount for which the guarantor is liable does
not exceed the consideration given under the contract for the
provision of the goods or services.

(7) In this section “creditor” means—

(a) 5if the amount meets condition A in section 382, the person
who is party to the loan relationship as creditor,

(b) if the amount meets condition B in that section, the person
other than the company who is party to the derivative
contract, and

(c) 10if the amount meets condition C in that section, the person
other than the company who is party to the relevant
arrangement or transaction.

439 Exemption in respect of certain pre-13 May 2016 loan relationships

(1) A loan relationship is a “qualifying old loan relationship” of a
15qualifying infrastructure company if—

(a) the company entered into the loan relationship on or before
12 May 2016, and

(b) as at that date, at least 80% of the total value of the company’s
future qualifying infrastructure receipts for the qualifying
20period was highly predictable by reference to qualifying
public contracts,

but see subsection (8) for cases where a loan relationship is not a
qualifying old loan relationship of the company.

(2) For the purposes of this section “the qualifying period” means—

(a) 25in a case where the loan relationship would cease to subsist
at any time before 12 May 2026 (if any amendments of the
loan relationship made on or after 12 May 2016 are ignored),
the period beginning with 12 May 2016 and ending with that
time, and

(b) 30in any other case, the period of 10 years beginning with 12
May 2016.

(3) For the purposes of this section “qualifying infrastructure receipts”,
in relation to a company (“C”), means—

(a) receipts arising from qualifying infrastructure activities
35carried on by C, and

(b) such proportion of the receipts arising from qualifying
infrastructure activities carried on by another company as, on
a just and reasonable basis, is attributable to C’s interests in
the other company (whether direct or indirect) arising as a
40result of shares or loans.

(4) For the purposes of this section receipts are highly predictable by
reference to qualifying public contracts so far as their value can be
predicted with a high degree of certainty because—

(a) the amounts of the receipts are fixed by a qualifying public
45contract, and

(b) the factors affecting the volume of receipts are fixed by a
qualifying public contract or are otherwise capable of being
predicted with a high degree of certainty.

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(5) For this purpose any provision of a qualifying public contract
(however expressed) that adjusts the amount of a receipt for changes
in the general level of prices or earnings is to be ignored.

(6) For the purposes of this section a contract is a “qualifying public
5contract” if—

(a) it was entered into at any time on or before 12 May 2016 and,
as at that time, it was expected to have effect for at least 10
years, and

(b) it was entered into either with a relevant public body or
10following bids made in an auction conducted by a relevant
public body.

(7) If a qualifying old loan relationship is amended after 12 May 2016 so
as to increase the amount lent or extend the period for which the
relationship is to subsist—

(a) 15section 438 is to have effect as if none of those amendments
were made (and, accordingly, the exemption under that
section has no effect in relation to the increase in the amount
or the period of the extension), and

(b) such apportionments of amounts in respect of the
20relationship are to be made as are just and reasonable.

(8) A loan relationship to which a qualifying infrastructure company is
a party at any time is not a qualifying old loan relationship of the
company at that or any subsequent time if, on the relevant
assumptions, the condition in subsection (1)(b) would not have been
25met.

(9) The relevant assumptions are that—

(a) the assets held by the company at that time were the only
assets that the company held on 12 May 2016,

(b) the assets held at that time by any other company in which it
30has interests (whether direct or indirect) arising as a result of
shares or loans were the only assets that the other company
held on 12 May 2016, and

(c) a qualifying infrastructure receipt could not be regarded as
highly predictable if, on 12 May 2016, the public
35infrastructure asset in question did not exist or was not in the
course of being constructed or converted.

(10) For the purposes of this section the value of a receipt on 12 May 2016
is taken to be its present value on that date, discounted using a rate
that can reasonably be regarded as one that, in accordance with
40normal commercial criteria, is appropriate for the purpose.

(11) In this section “receipts” means receipts of a revenue nature.

440 Loans etc made by qualifying infrastructure companies to be ignored

(1) This section applies where—

(a) a company is a qualifying infrastructure company
45throughout an accounting period, and

(b) the company would (but for this section) have had tax-
interest income amounts in the accounting period.

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(2) For the purposes of this Part, the company is treated as if it did not
have any tax-interest income amounts in the accounting period.

441 Tax-EBITDA of qualifying infrastructure company to be nil

(1) This section applies where a company is a qualifying infrastructure
5company throughout an accounting period.

(2) For the purposes of this Part, the tax-EBITDA of the company for the
accounting period is nil.

442 Amounts of qualifying infrastructure company left out of account for
other purposes

(1) 10This section applies where a company is a qualifying infrastructure
company throughout a relevant accounting period.

(2) In calculating—

(a) the adjusted net group-interest expense of the worldwide
group for the period of account concerned, or

(b) 15the qualifying net group-interest expense of the worldwide
group for the period of account concerned,

amounts that are exempt amounts of the company under section 438,
or are treated as mentioned in section 440, are to be left out of
account.

(3) 20For the purposes of this Part the group EBITDA of the worldwide
group for the period of account concerned is to be calculated as if the
group did not include the company in respect of the relevant
accounting period.

443 Interest capacity for group with qualifying infrastructure company etc

(1) 25If a worldwide group for a period of account includes a qualifying
infrastructure company at any time, the general rule is that the
interest capacity of the group for the period is calculated as if section
392 did not contain the de minimis provisions.

(2) But this is subject to an exception that depends on the following
30comparison.

(3) The following amounts must be compared with each other—

(a) the total disallowed amount of the group in the period
calculated as if this Chapter (including subsection (1) of this
section but ignoring the remainder of it) were contained in
35this Part (“the Chapter 8 amount”), and

(b) the total disallowed amount of the group in the period
calculated as if this Chapter were not contained in this Part
and as if section 392 contained only the de minimis
provisions (“the ordinary amount”).

(4) 40If the Chapter 8 amount exceeds the ordinary amount, the interest
capacity of the worldwide group for the period is taken to be the de
minimis amount (as defined by 392(3)).

(5) If the interest capacity of the worldwide group for the period is given
by subsection (4), nothing else in this Chapter has effect in relation to
45the worldwide group for the period.

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(6) For the purposes of this section the reference to section 392 not
containing the de minimis provisions is a reference to that section not
containing subsections (2) and (3) of that section.

(7) For the purposes of this section the reference to section 392
5containing only the de minimis provisions is a reference to that
section having effect as if for subsections (1) and (2) of that section
there were substituted—

(1) For the purposes of this Part the “interest capacity” of a
worldwide group for a period of account of the group is the
10de minimis amount.”

Supplementary
444 Joint venture companies

(1) This section makes modifications of this Part in relation to an
accounting period of a qualifying infrastructure company (“the joint
15venture company”) where—

(a) one or more qualifying infrastructure companies (“the
qualifying investor or investors”) have shares in the joint
venture company,

(b) other persons (“the other investors”) who are not qualifying
20infrastructure companies have all the other shares in the joint
venture company,

(c) each of the investors (that is to say, the qualifying investor or
investors and the other investors) has lent money to the joint
venture company,

(d) 25the amounts each of the investors has lent stand in the same,
or substantially the same, proportion as the shares in the joint
venture company that each of them has,

(e) at all times in the accounting period the investors have the
same rights in relation to the shares in or assets of the joint
30venture company and the same rights in relation to the
money debt or debts in question, and

(f) the joint venture company makes an election for the purposes
of this section that has effect for the accounting period (but
see section 445 for further provision about elections).

(2) 35Section 401 has effect as if the qualifying investor or investors were
not investors in the group for times in the accounting period falling
in the relevant period of account.

(3) Section 427 has effect as if, in determining the appropriate
proportion in relation to an associated worldwide group, it is
40assumed that the qualifying investor or investors were not investors
in the group for times in the accounting period falling in the relevant
period of account.

(4) In consequence of subsection (2) or (3), the shares of the qualifying
investor or investors in the group are treated as distributed for times
45in the accounting period falling in the relevant period of account
among the other investors in proportion to the actual shares of the
other investors in the group.

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(5) For the purposes of section 438 there is a reduction in any amount
that would otherwise qualify as an exempt amount in the accounting
period where—

(a) the exemption operates by reference to creditors being within
5subsection (3) of that section, and

(b) the creditor in relation to the amount is not an investor.

(6) The amount qualifying as an exempt amount is to be reduced so that
only the qualifying proportion of it qualifies.

(7) For the purposes of this section—

  • 10“the qualifying proportion” means the proportion of the shares
    that the qualifying investor or investors have in the joint
    venture company in the accounting period, and

  • “the non-qualifying proportion” means the proportion of the
    shares that the other investors have in the joint venture
    15company in the accounting period.

(8) The treatment mentioned in section 440(2) is to extend only to the
qualifying proportion of the tax-interest income amounts in the
accounting period.

(9) Section 441(2) has effect as if the tax-EBITDA of the company for the
20accounting period were the amount determined as follows.

Step 1

Find the tax-EBIDTA of the company for the accounting period if
section 441 were ignored.

Step 2

25The tax-EBITDA of the company for the accounting period is equal
to the non-qualifying proportion of that amount.

(10) Section 442(3) has effect as if for the words “the group did not include
the company” there were substituted “amounts of the company were
limited to the non-qualifying proportion of those amounts”.

445 30Joint venture groups

(1) This section applies if the joint venture company is the ultimate
parent of a multi-company worldwide group at any time in the
accounting period.

(2) An election made by the joint venture company under section 444 in
35relation to the accounting period is of no effect unless all the other
members of the group—

(a) are qualifying infrastructure companies for the accounting
period,

(b) are wholly-owned subsidiaries of the joint venture company
40throughout the accounting period, and

(c) have the same accounting periods as the joint venture
company.

(3) In determining whether the conditions in section 444(1)(c) to (e) are
met in relation to the accounting period of the joint venture
45company, any loans made to any of the other members of the group
are treated as if they were made to the joint venture company.

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(4) If the joint venture company makes an election under section 444 for
the accounting period, the modifications made by subsections (5) to
(10) of that section are also to apply in relation to each of the other
members of the group.

446 5Joint ventures: supplementary

(1) If—

(a) the joint venture company makes an election under section
444 in relation to an accounting period,

(b) that company, or any member of the worldwide group of
10which it is a member, is the creditor for the purposes of
section 438 in any case, and

(c) the company mentioned in that section in that case is a not a
member of that group at any time in the accounting period,

section 438 has effect in that case as if subsection (3)(b) were of no
15effect in relation to that time.

(2) Section 434(1) to (5) apply to an election under section 444 as they
apply to an election under section 433.

(3) For the purposes of section 444 the investors are not to be regarded
as having the same rights in relation to the shares in or assets of the
20joint venture company, or in relation to the money debt or debts in
question, at any time if—

(a) provision is in force at that time in respect of any of the
relevant matters that differs in relation to different persons or
has, or is capable of having, a different effect in relation to
25different persons (whether at that or any subsequent time),

(b) arrangements are in place at that time the effect of which is
that, at that or any subsequent time, the rights of some
persons in relation to any of the relevant matters differ, or
will or may differ, from the rights of others in relation to the
30matters in question, or

(c) any other circumstances exist at that time as a result of which
the rights of some persons in relation to any of the relevant
matters cannot reasonably be regarded as being, in
substance, the same rights as others in relation to the matters
35in question at that or any subsequent time.

(4) In this section—

(a) “the relevant matters” means the shares in or assets of the
joint venture company or the money debt or debts in
question,

(b) 40“rights” includes powers,

(c) “different persons” includes persons of a different class or
description, and

(d) “arrangements” include any agreement, understanding,
scheme, transaction or series of transactions (whether or not
45legally enforceable).

447 Partnerships and other transparent entities

(1) Subsections (2) to (4) apply where a company is a member of a
partnership.

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(2) For the purposes of section 433 the cases in which assets recognised
in a balance sheet of the company are regarded as deriving their
value from the matters mentioned in subsection (5)(a) to (e) of that
section include any case where—

(a) 5the company’s interest in the partnership is recognised in the
balance sheet of the company, and

(b) that partnership interest derives its value from those matters.

(3) For the purposes of section 436 the cases in which an entry in respect
of an asset is (or would be) recognised in a balance sheet of the
10company include any case where—

(a) the asset is (or would be) recognised in a balance sheet of the
partnership, and

(b) the company has a significant interest in the partnership.

(4) For the purposes of section 438(4)

(a) 15the obligations mentioned there include any case where the
obligations are those of the partnership, and

(b) references to a qualifying infrastructure company in that case
include the partnership.

(5) Subsections (2) to (4) apply (with any necessary modifications) in
20relation to transparent entities that are not partnerships as they
apply in relation to partnerships.

(6) For this purpose an entity is “transparent” if it is not chargeable to
corporation tax or income tax as a person (ignoring any exemptions).

448 Decommissioning

(1) 25This Chapter applies in relation to an activity consisting of the
decommissioning of a public infrastructure asset as it applies in
relation to its provision.

(2) In determining whether a company is a qualifying infrastructure
company the following assets of the company are ignored (and the
30income arising from them is, accordingly, also ignored)—

(a) any shares in a decommissioning fund, and

(b) any loan relationships or other financing arrangements to
which a decommissioning fund is party.

(3) A decommissioning fund is to be regarded as a qualifying
35infrastructure company.

(4) For the purposes of this section “a decommissioning fund” means a
fund which—

(a) holds particular investments for the sole purpose of funding
activities for, or in connection with, the decommissioning or
40other provision of public infrastructure assets, and

(b) is prevented from using the proceeds of the investments, or
the income arising from them, for any purpose other than the
purpose mentioned in paragraph (a) or returning surplus
funds.

(5) 45In this section “decommissioning” includes demolishing and putting
out of use.

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449 Minor definitions for purposes of this Chapter

(1) For the purposes of this Chapter—

  • “balance sheet” means a balance sheet that is drawn up in
    accordance with generally accepted accounting practice,

  • 5“financial asset” has the same meaning as it has for accounting
    purposes,

  • “loan relationships or other financing arrangements” means—

    (a)

    loan relationships,

    (b)

    derivative contracts in relation to which the condition
    10in section 387(4) is met (underlying subject matter to
    be interest rates etc),

    (c)

    finance leases, or

    (d)

    debt factoring or similar transactions, and

  • “the UK sector of the continental shelf” means the areas
    15designated by Order in Council under section 1(7) of the
    Continental Shelf Act 1964.

(2) For the purposes of this Chapter references to a company which is
“associated” with another company at any time are references to
companies that are members of the same worldwide group at that
20time.

CHAPTER 9 Cases involving particular types of company or business
Banking companies
450 Banking companies

(1) 25This section applies in relation to a banking company carrying on a
trade so far as the activities of the trade consist of or include dealing
in financial instruments.

(2) For the purposes of section 382 an amount is treated as meeting
condition A, B or C if it is a debit arising directly from dealing in
30financial instruments other than one in respect of an impairment
loss.

(3) An amount—

(a) which is treated as meeting condition A, B or C for the
purposes of section 382 as a result of subsection (2) of this
35section, and

(b) which, but for that subsection, would not be a tax-interest
expense amount,

is to be left out of account, or brought into account, as a result of
section 377(2) or 380(2) after the second but before the third kind of
40tax-interest expense amounts mentioned there.

(4) For the purposes of section 385 an amount is treated as meeting
condition A, B, C or D if it is a credit arising directly from dealing in
financial instruments other than one in respect of the reversal of an
impairment loss.

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(5) In determining a relevant expense amount under section 411 in the
case of the company, that section has effect as if it also included a
reference to losses arising directly from dealing in financial
instruments other than impairment losses.

(6) 5In determining a relevant income amount under section 411 in the
case of the company, that section has effect as if it also included gains
arising directly from dealing in financial instruments other than the
reversal of impairment losses.

(7) In this section—

  • 10“banking company” has the same meaning as in Part 7A of CTA
    2010 (see sections 269B to 269BD), and

  • “financial instruments” includes—

    (a)

    loan relationships,

    (b)

    derivative contracts, and

    (c)

    15shares or other securities.

Oil and gas
451 Oil and gas

(1) For the purposes of this Part any amount which is, or is taken into
account in calculating—

(a) 20the ring fence income of a company within the meaning of
section 275 of CTA 2010, or

(b) a company’s aggregate gain or loss under section 197(3) of
TCGA 1992,

is to be ignored.

(2) 25For the purpose of applying subsection (1) in relation to the financial
statements of a worldwide group of which the company is a member
such adjustments are to be made to those statements as are just and
reasonable.

REITs
452 30Real Estate Investment Trusts

(1) This section applies if a company (a “property rental business
company”)—

(a) is a company which has profits for an accounting period
which are not charged to corporation tax as a result of section
35534(1) or (2) of CTA 2010, or

(b) is a company to which gains accrue in an accounting period
that are not chargeable gains as a result of section 535(1) or (5)
of CTA 2010.

(2) In this section “the residual business company” means the company
40which—

(a) so far as it carries on residual business, is treated, as a result
of section 541 of CTA 2010, as a separate company distinct
from the property rental business company, but

(b) ignoring that section, is in fact the same company as the
45property rental business company.