20. The gain can be paid in one of three ways (or a mixture thereof): a lump sum at the time of the refinancing; a reduced unitary charge or an increase in the scope of services.
21. As a general rule of thumb if the investor is realising his gain at the time of the refinancing then the Department should look to do likewise.
22. If there are insufficient funds and they are locked in the original distribution the balance should be paid as reduction in the Unitary Charge.
23. If the gain is realised though a reduction in the interest rate or a lengthened debt tail rather than new debt then the refinancing gain generally accrues over time and it is more appropriate for the Department to take the gain in the form of a reduced unitary charge. This gives the investor an additional tax benefit because reduced income leads to a reduced corporation tax bill. As such, it will be necessary to recalculate the gain on a post tax basis to ensure that the MOD receives the correct amount.
24. Where the gain is not paid immediately after refinancing then the MOD is entitled to the payment of interest. The rate of interest will vary from project to project but will generally equate to the rate of interest on the senior debt.
25. Exceptionally, a Project may choose to take the gain in the form of increased services, but a full VFM analysis will need to be conducted and a review by the scrutineers as this may breach the projects Performance, Cost and Time (PCT) envelope which was approved by the Investment Approvals Board (IAB) (See Approvals).