Section 439 | Exemption in respect of certain pre-13 May 2016 loan relationships ^F1

(1)A loan relationship is a “qualifying old loan relationship” of a qualifying infrastructure company if—^F1

(a)the company entered into the loan relationship on or before 12 May 2016, and^F1

(b)as at that date, at least 80% of the total value of the company's future qualifying infrastructure receipts for the qualifying period was highly predictable by reference to qualifying public contracts,^F1

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—^F1

(a)in 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^F1

(b)in any other case, the period of 10 years beginning with 12 May 2016.^F1

(3)For the purposes of this section “qualifying infrastructure receipts”, in relation to a company (“C”), means—^F1F2

(a)receipts arising from qualifying infrastructure activities carried on by C, and^F1

(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 result of shares or loans ,^F1F2

but ignoring amounts that represent the reimbursement of expenses incurred by C or the other company.

(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—^F1

(a)the amounts of the receipts are fixed by a qualifying public contract, and^F1

(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.^F1

(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.^F1

(6)For the purposes of this section a contract is a “qualifying public contract” if—^F1

(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^F1

(b)it was entered into either with a relevant public body or following bids made in an auction conducted by a relevant public body.^F1

(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—^F1

(a)section 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^F1

(b)such apportionments of amounts in respect of the relationship are to be made as are just and reasonable.^F1

(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 met.^F1

(9)The relevant assumptions are that—^F1

(a)the assets held by the company at that time were the only assets that the company held on 12 May 2016,^F1

(b)the assets held at that time by any other company in which it has 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^F1

(c)a qualifying infrastructure receipt could not be regarded as highly predictable if, on 12 May 2016, the public infrastructure asset in question did not exist or was not in the course of being constructed or converted.^F1

(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 normal commercial criteria, is appropriate for the purpose.^F1

(11)In this section “receipts” means receipts of a revenue nature.^F1