The Local Authorities (Capital Finance and Accounting) (England) (Amendment) Regulations 2025
The Local Authorities (Capital Finance and Accounting) (England) (Amendment) Regulations 2025 amend the 2003 Regulations, extending the timeframe for rules on fair value gains and losses of pooled investment funds (Regulation 30K) until March 2029 for investments made before April 2024.
They also extend the application of regulations concerning the accounting treatment of infrastructure assets (Regulation 30M), postponing necessary adjustments until April 2028.
These changes affect how English and Welsh local authorities account for certain assets and investments in their financial statements.
Arguments For
Extending existing regulatory frameworks: These amendments extend the timelines for existing regulations, providing local authorities with more time to adapt to the accounting requirements.
Maintaining financial stability and consistency: The changes aim to ensure consistency in financial reporting and better manage the treatment of pooled investment funds and infrastructure assets across local authorities.
Reducing administrative burden (for infrastructure assets): By extending the application of regulation 30M, the need for prior period adjustments related to infrastructure assets is delayed, reducing potential administrative workload in the short-term.
Legal basis in the Local Government Act 2003: The regulations are explicitly based on the powers conferred by sections 21(1) and 123(1) and (2) of the Local Government Act 2003, providing a solid legal foundation.
Improved clarity on Fair Value Gains and Losses: Regulation 3 provides an extension to the existing financial reporting treatment of fair value gains and losses, offering clearer guidelines for local authorities.
Arguments Against
Potential for increased costs in the future: A delay in adopting new accounting practices may lead to a larger adjustment at a later date. Delays could lead to larger adjustments later.
Complexity for local authorities: Despite the intent for improved clarity, amendments could still increase the complexity of financial reporting requirements in the longer term
Potential for inconsistencies across local authorities: Local authorities may interpret or implement the extended regulations differently, leading to variations across the sector.
Lack of comprehensive regulatory impact assessment: The explanatory note mentions no impact on the private or voluntary sector, without providing further detail or analysis, leading to a potential oversight of indirect effects.
- Citation, commencement and extent (1) These Regulations may be cited as the Local Authorities (Capital Finance and Accounting) (England) (Amendment) Regulations 2025. (2) These Regulations come into force on 23rd April 2025. (3) These Regulations extend to England and Wales.
This section details the title, effective date, and geographical scope of the regulations.
The regulations are officially titled "Local Authorities (Capital Finance and Accounting) (England) (Amendment) Regulations 2025", effective April 23rd, 2025, and apply to England and Wales.
- Amendment of the Local Authorities (Capital Finance and Accounting) (England) Regulations 2003 The Local Authorities (Capital Finance and Accounting) (England) Regulations 2003 are amended as follows.
This section announces that the following sections will amend the Local Authorities (Capital Finance and Accounting) (England) Regulations 2003.
- Amendment of regulation 30K In regulation 30K (Fair value gains and losses of pooled investment funds), for paragraph (5) substitute— “(5) This regulation applies in relation to accounts prepared for financial years falling within the period— (a) beginning with 1st April 2018 and ending with 31st March 2025; (b) beginning with 1st April 2025 and ending with 31st March 2029, in respect of an investment mentioned in paragraph (2)(a) that was made before 1st April 2024.”
This section amends regulation 30K, which addresses fair value gains and losses from pooled investment funds.
The amendment extends the period during which the regulation applies.
Specifically, the existing rules, applicable to financial years between April 1st, 2018 and March 31st, 2025, are now extended to include financial years between April 1st, 2025 and March 31st, 2029, but only for investments made before April 1st, 2024.
- Amendment of regulation 30M In regulation 30M(1)(a) (Accounting for infrastructure assets), for “2024” substitute “2028”.
This section amends regulation 30M(1)(a), which deals with accounting for infrastructure assets.
The year "2024" is replaced with "2028", extending the timeframe for certain accounting practices related to infrastructure assets.
Signed by authority of the Secretary of State for Housing, Communities and Local Government Jim McMahon Minister of State Ministry of Housing, Communities and Local Government at 10.40 a.m. on 1st April 2025
This section provides the signature and authentication details of the Minister of State from the Ministry of Housing, Communities and Local Government, confirming the regulations' enactment.
Explanatory Note (This note is not part of the Regulations) These Regulations amend the Local Authorities (Capital Finance and Accounting) (England) Regulations 2023 (S.I. 2003/3146) (the “2003 Regulations”). Regulation 30K of the 2003 Regulations provides that, in relation to financial years falling within the period beginning on 1st April 2018 and ending on 31st March 2025, a local authority must not charge an amount to its revenue account to reflect any fluctuation in the fair value of a local authority’s investment in a pooled investment fund. Instead, such amounts must be recorded in a separate account established and usable solely for that purpose. Regulation 3 of these Regulations extends the application of regulation 30K in respect of investments made by the local authority before 1st April 2024, in relation to accounts for financial years falling between the period beginning on 1st April 2025 and ending on 31st March 2029. Regulation 30M of the 2003 Regulations relates to the treatment of infrastructure assets within a local authority's statement of accounts for financial years beginning on or before 1st April 2024. An infrastructure asset is an asset owned by a local authority, which there is no prospect of the authority selling or using for any purpose other than that for which it was created, and which forms part of the infrastructure of the authority's area. Regulation 30M(2) provides that a local authority does not need to make any prior period adjustment in respect of infrastructure assets to the balances of any statement of accounts to which it applies. Where a local authority replaces a component of an infrastructure asset, regulation 30M(3) also provides the authority with a choice of how to identify the carrying amount to be derecognised in respect of that component. Regulation 4 of these Regulations extends the application of regulation 30M in relation to accounts for financial years beginning on or before 1st April 2028. A full regulatory impact assessment has not been produced for this instrument as no impact on the private or voluntary sectors is foreseen.
The explanatory note summarizes the key changes made by these regulations.
It clarifies the amendments to regulations 30K and 30M, focusing on the extended timeframes for reporting requirements related to pooled investment funds and infrastructure assets.
The note also states that a full regulatory impact assessment was not conducted because no impact on the private or voluntary sectors was anticipated.