BIM64170 - Private Finance Initiative (PFI): contribution of land: contents
As part of the commercial arrangements, a number of PFI projects involve the public sector purchaser contributing land, or an initial cash sum, to the private sector operator.
Where land is introduced the arrangement may involve a PFI property, e.g. a hospital, being built on the land contributed. Alternatively the land, or part of it, may be surplus to the purchaser’s requirements and it is for the operator to decide what use is to be made of it. For example it may be developed for sale, investment, or sold outright.
Whatever the arrangement, the contribution, whether it is land, some other form of money’s worth, or money, is intended to reduce the purchaser’s unitary charge (the annual service payment).
The purchaser and the operator will generally determine the amount of the unitary charge on the basis of a discounted cash flow model, which is produced by using a set of assumptions negotiated by the parties. The introduction of land, as a contribution towards the project costs, and the timing of the realisation of the value of the land, will have an impact on the cash flow of the operator and, therefore, on the price to be charged to the purchaser.
The guidance on contributions of land is arranged as follows:
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BIM64175Contribution of land: reverse premiums
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BIM64180Contribution of land: capital or revenue receipt
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BIM64185Contribution of land: allocation against capital expenditure
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BIM64190Contribution of land: value of asset
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BIM64195Contribution of land: investment or trading stock
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BIM64200Contribution of land: chargeable gains consequences
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BIM64205Contribution of land: example 1
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BIM64210Contribution of land: example 2
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BIM64215Contribution of land: example 3
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BIM64220Contribution of land: example 4
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BIM64225Third party revenue
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BIM64230Bid costs
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BIM64235Pre-trading expenditure