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Local Government Finance Act 1988

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Capital expenditure

130Acquisition of interests less than freehold

After section 79 of the [1980 c. 65.] Local Government, Planning and Land Act 1980 there shall be inserted the following section—

79AAcquisition of leasehold etc. treated as acquisition of freehold

(1)In any case where—

(a)an interest in or right over land is acquired on or after 10 March 1988, and

(b)the interest or right confers a right to possession or occupation of the land, and

(c)the interest or right is neither the fee simple absolute in possession nor an interest or right not exceeding one year in duration, and

(d)the acquisition is neither by gift nor by deed with no consideration other than the presumed consideration imported by the deed,

then, for the purposes of this Part of this Act, the authority making the acquisition shall be treated as having acquired, for a consideration which is not in money alone, the fee simple absolute in possession in that land, subject only to the interests and rights referred to in subsection (2) below.

(2)The interests and rights referred to in subsection (1) above are those (if any) to which the interest or right which is actually acquired is subject at the time of the acquisition, excluding any which arise by virtue of a mortgage or charge to secure the payment of money.

(3)In subsection (1)(b) above—

(a)“possession” has the same meaning as in the Law of Property Act 1925, that is to say, it includes receipt of rents and profits or the right to receive the same, if any; and

(b)“occupation” means occupation with-out possession but, subject to that, includes future occupation.

(4)Subsection (12) of section 80 below applies for the purposes of this section but where, by virtue of that subsection, an authority is taken to acquire an interest exceeding one year in duration, that interest shall not be regarded for the purposes of subsection (1)(c) above as the fee simple absolute in possession.

131Prescribed expenditure

(1)In the Local Government, Planning and Land Act 1980 (in this section referred to as “the 1980 Act”), in section 71 (expenditure to which Part VIII of the 1980 Act applies) for subsection (2) there shall be substituted the following subsection—

(2)Where any of the activities specified in paragraph 1 of Schedule 12 to this Act is undertaken by or for an authority, then, subject to paragraphs 2 to 5 of that Schedule, the amount of expenditure which,—

(a)by virtue of sections 79A to 80B below, the authority is to be taken to incur on that activity, or

(b)in a case not falling within those sections, the authority actually incurs on that activity,

is prescribed expenditure for the purposes of this Part of this Act.

(2)In section 80 of the 1980 Act (which determines the amount of expenditure which is to be taken to be incurred where an interest in or right over property is acquired) for subsection (4) there shall be substituted the following subsection—

(4)Where the acquisition is, or is treated by virtue of section 79A above as being, the acquisition of the fee simple absolute in possession and subsection (3) above does not apply, the amount is the consideration in money which would be obtained for that fee simple if it were sold on the open market by a willing seller at the time of the acquisition; and in determining, for the purpose of calculating that amount, to what interests and rights the fee simple is at that time subject—

(a)where section 79A applies there shall be taken into account only those mentioned in subsection (2) of that section; and

(b)there shall be left out of account those arising by virtue of a mortgage or charge to secure the payment of money.

(3)In subsection (5) of the said section 80 for paragraph (a) there shall be substituted the following paragraph—

(a)the acquisition, though treated by virtue of section 79A above as the acquisition of a fee simple, is in fact the acquisition of a leasehold interest in land; and.

(4)In subsection (8) of the said section 80 for the words “right to occupy” there shall be substituted “right to possession or occupation of”.

(5)Subsection (14) of the said section 80 shall be omitted.

(6)In section 80A of the 1980 Act (payment for works carried out for an authority), in subsection (5) (value of works at any time) at the end of paragraph (b) there shall be added and

(c)the value of any consideration which is not in money and which has been or is to be given by the authority for the carrying out of the works.

(7)In subsection (9) of the said section 80A (works treated as carried out for an authority in cases specified in or determined under regulations) after the words “subsection (1)” there shall be inserted “and section 71(2)”.

(8)This section shall be deemed to have come into force on 10 March 1988 but, subject to subsection (9) below, the reference in section 80A(5)(c) of the 1980 Act (as amended by subsection (6) above) to consideration which is not in money does not include consideration given in pursuance of a contract entered into before that date.

(9)In any case where the consideration which is not in money and which is given pursuant to a contract entered into before 10 March 1988 is affected by—

(a)a variation of the contract on or after that date,

or

(b)the exercise on or after that date of an option or other right conferred by the contract,

so much (if any) of that consideration as exceeds what it would have been if the contract had not been so varied or, as the case may be, if the option or other right had not been so exercised shall be regarded for the purposes of subsection (8) above as given in pursuance of a contract entered into after 10 March 1988.

132Share and loan capital and guarantee payments

(1)In the [1980 c. 65.] Local Government, Planning and Land Act 1980 (in this section referred to as “the 1980 Act”), in Schedule 12 (prescribed expenditure under Part VIII), in paragraph 1, in sub-paragraph (f) the final “and” shall be omitted and at the end of sub-paragraph (g) there shall be added—

(h)the acquisition of share capital or loan capital (within the meaning of section 78 of the Finance Act 1986) of any body corporate which is not an authority to which this Part of this Act applies, and

(i)the making of payments pursuant to an obligation arising under a guarantee or indemnity given with respect to money borrowed by any person.

(2)At the end of paragraph 3 of the said Schedule 12 there shall be inserted the following paragraph—

3AThe reference in paragraph 3 above to a county council includes a reference to any district council or other body in whom, by virtue of an order under any provision of Part VII of the Local Government Act 1985, there is for the time being vested a superannuation fund which, before the abolition date, within the meaning of that Act, was maintained by the Greater London Council or a metropolitan county council as mentioned in section 60 of that Act.

(3)With respect to expenditure on the matters specified in paragraphs (h) and (i) of paragraph 1 of the said Schedule 12 (as amended by subsection (1) above), the powers conferred by paragraph 4 of that Schedule (to provide by regulations that certain expenditure which would otherwise be prescribed expenditure shall not be such expenditure) may be exercised so as to have effect with respect to expenditure incurred (or treated by virtue of any provision of Part VIII of the 1980 Act as incurred) on or after 10 March 1988.

(4)In section 75 of the 1980 Act (capital receipts) the power conferred by subsection (5)(d) (to provide that certain assets are brought within the scope of the section) may be exercised with respect to disposals on or after 10 March 1988 of assets acquired on or after that date in cases where, by virtue of the amendments made by subsection (1) above, expenditure on the acquisition of the assets is prescribed expenditure; and, with respect to capital receipts resulting from such disposals, the powers conferred by sections 72(3)(d) and 75(5)(a) of that Act (which relate to the prescribed proportion of an authority’s capital receipts) may be similarly exercised.

(5)In section 80 of the 1980 Act (valuation)—

(a)in subsections (9) and (10) (which relate to the acquisition of property in goods or an interest or right in goods) after the word “goods”, in each place where it occurs, there shall be inserted “share capital or loan capital”; and

(b)at the end of subsection (15) (definition of “property” for subsections (9) and (10)) there shall be added the words “and loan capital has the same meaning as in section 78 of the Finance Act 1986.”

(6)Subsections (1), (2) and (5) above shall be deemed to have come into force on 10 March 1988.

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