Treasury guidance excludes equity sales from gain sharing although profits on selling shares would potentially be subject to taxation

3.6  The Treasury acknowledged in its July 2002 guidance that the profits on selling equity shares in PFI project companies would not be subject to gain sharing.26 The factors the Treasury's decision took into account included:

■  these transactions should not affect the financial robustness of the project company which is in a contractual relationship with an authority;

■  the value for which the shares are sold may reflect factors other than the performance of the project;

■  profits on the sale of shares in PFI project companies will, like other chargeable gains, be potentially subject to taxation; and

■  if gain sharing were to be applied it is possible that primary equity returns may rise to compensate.

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26  The detail of this exemption is set out in the standard contract terms issued by the Treasury.