BIM64200 - Private finance initiative (PFI): contribution of land: CGT consequences

Where a private sector 'operator' receives money's worth, e.g. land, or money as a capital contribution towards the construction costs of a fixed capital asset of its business, the base cost of the PFI property, for CGT purposes, is reduced by the value of the asset contributed (see BIM64190). The operator has not incurred the expenditure for the purposes of TCGA92/S38 (see CG15150 onwards).

In many cases, the contribution of money's worth is made by a government, public or local authority and TCGA92/S50 specifically requires a reduction in the base cost of the asset in such circumstances (see CG15288).

Where the land contributed is acquired as an investment its base cost for capital gains tax purposes is the price agreed between the parties, provided it is a commercial transaction (see BIM64190). Any increase or decrease in value, on its eventual disposal, will result in a chargeable gain or allowable loss.