PART 2CREDIT ARRANGEMENTS
F1TRANSACTIONS WHICH ARE CREDIT ARRANGEMENTS
Securitisation transactions2A.
A securitisation transaction must be treated as a transaction falling within section 7(2)(a).
TRANSACTIONS WHICH ARE NOT CREDIT ARRANGEMENTS
Liabilities that do not arise from capital expenditure3.
(1)
Subject to F2paragraphs (2) and (3) liabilities of a local authority that do not arise from the incurring by the authority of capital expenditure are liabilities specified for the purposes of section 7(3)(c) (Exclusion of certain liabilities from definition of “qualifying liabilities”).
(2)
Paragraph (1) does not apply where proper practices in accordance with regulation 25 require the recognition of a F3non-current asset which is not a financial asset.
F4(3)
Paragraph (1) applies to liabilities that are credit arrangements entered into after 31st March 2004.
(4)
Paragraph (1) does not apply where liabilities are credit arrangements in accordance with section 48 of the Local Government and Housing Act 1989 entered into before 1st April 2004 which are not funded by capital receipts or credit arrangements under section 50(3) of that Act until such arrangements cease or are varied in any way.
Retirement benefits4.
(1)
Liabilities for retirement benefits as represented by an appropriation to a pension reserve in accordance with proper practices in accordance with regulation 25 are liabilities specified for the purposes of section 7(3)(c).
F5(2)
For the purposes of paragraph (1) and regulation 24 “retirement benefits” means benefits payable pursuant to statutory requirements under an arrangement accounted for as a defined benefit pension plan or as other long-term employee benefits (as defined in accordance with proper practices).
CALCULATION OF COST OF CREDIT ARRANGEMENTS AND OTHER CONTROLS
F6Calculation of cost of credit arrangements5.
For the purposes of section 8(2) (entry into a credit arrangement or variation to be treated as the borrowing of an amount equal to the cost of the arrangement or variation), the cost of a credit arrangement or variation of a credit arrangement is—
(a)
in the case of a securitisation transaction, an amount equal to the value of the consideration received by the authority as a result of that transaction; or
(b)
in all other cases, the amount of the liability in respect of that arrangement or variation which is shown, in accordance with proper practices, in the authority’s accounts.
F7Varied Transactions5A.
For the purposes of Chapter 1 of Part 1 (Capital finance etc), a local authority shall be taken to have entered into a credit arrangement where —
(a)
on or after 1st April 2004, it enters into a transaction (“the new transaction”) which varies a transaction entered into previously, whether before, on or after 1st April 2004 (“the earlier transaction”);
(b)
the earlier transaction did not result in the local authority being taken to have entered into a credit arrangement; and
(c)
the local authority would, if it had entered into the earlier transaction as varied by the new transaction on —
(i)
the date on which the earlier transaction was entered into; or
(ii)
if later, 1st April 2004,
be taken to have entered into a credit arrangement, and the date on which it is taken to have entered into the credit arrangement by virtue of this regulation is the date on which it enters into the new transaction