Local government finance circular 7-2023: accounting for service concession arrangements, leases and similar arrangements

Introduction and contents

Dear Director of Finance,

Accounting for Service Concession Arrangements, Leases and Similar Arrangements

Local Government Finance Circular 7/2023 replaces Local Government Finance Circular 10/2022 and sets out the accounting requirements for service concession arrangements, leases and similar arrangements from 1 April 2024.

The temporary flexibility which permitted a local authority to recognise the principal repayments for a service concession arrangement over the asset life rather than contractual term was only available for use in either 2022-23 or 2023-24 and only for service concession arrangements in place prior to 1 April 2022 and is therefore not reflected in the new statutory guidance.

With the exception of those service concession arrangements to which the flexibility was applied in either 2022-23 or 2023-24, from 1 April 2024 the annual statutory charge (the statutory repayment of debt) to the General Fund for all existing and new service concession arrangements, leases and similar arrangements must reflect the principal element of the contractual repayments and must be charged to the General Fund over the term of the contract.

For service concession arrangements entered into prior to 1 April 2022, where the temporary flexibility to permit the principal repayments to be accounted for over the asset life rather than contract term was exercised in either 2022-23 or 2023-24, that accounting treatment, as set out Finance Circular 10/2022, may continue to apply.

Yours faithfully

Elanor Davies

Head of Local Authority Accounting