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TIOPA10/S435(5)

Where a company has made an election to be a qualifying infrastructure company which has effect for an accounting period, but it is also a member of a joint infrastructure election which has effect for that same accounting period, in determining whether something is “insignificant�, each company in the joint election is deemed to have all the income and assets of their fellow members (on a consolidated basis).

Example 1

Assumed facts:

• Company A has two wholly owned subsidiaries, Company B and Company C.
• Company A has no other assets than its shares in these companies, and no income other than dividends receivable as a result of holding these shares.
• Company B’s only assets are shares in ten special purpose companies holding qualifying infrastructure companies. Its only income is the dividends receivable as a result of its holding these shares.
• Company C has two assets. The first, a waste plant, has been constructed as a result of a contract with a local authority to collect and process household waste â€� the capacity of this plant is limited to the waste it has to collect under this contract. The second, a brick factory, has been constructed by C such that it can seek out alternative commercial contracts.

In isolation, Company C would fail the public infrastructure income and assets test in the twelve-month accounting period ending 31 December 2019 on the basis that its commercial manufacturing operations form approximately 10% of its income and assets for that period.

Company B would pass these same tests for that period, on the basis that all of its income and assets derive from shares in qualifying infrastructure companies.

However, if both Company B and Company C made elections to be qualifying companies, and they make a joint infrastructure election, both could pass the public infrastructure income and asset tests. Company C’s income and assets from its commercial manufacturing operations would be insignificant relative to Company B and its subsidiaries.

If Company A were also a member of the joint infrastructure election group, only dividends receivable in Company B from companies external to the joint infrastructure election group would be taken into account; any dividends receivable by Company A from Company B would be excluded to prevent double counting.

Example 2

A company is incorporated as a special purpose company (SPC) to bid for a private finance initiative (PFI) contract to design, build, finance, maintain and operate a waste facility.

When the waste facility is complete. The SPC recognises £80m from its PFI contract with the local authority. It also generates £4m interest income from lending to its shareholders. The latter is not considered derived from a qualifying infrastructure activity. The £4m is significant both in absolute terms and relative to the £80m generated from its PFI contract. Consequently, on a standalone basis, the public infrastructure income test is failed.

However, the SPC is a member of a group with other qualifying infrastructure companies. A joint infrastructure election is made, as a result of which the total income derived from qualifying infrastructure activities is £300m. The £4m interest income in the SPC is now “insignificant� for the public infrastructure income test.