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HMRC internal manual

Corporate Finance Manual

Other tax rules on corporate finance: securitisation: background: master trust securitisation

Master trust securitisations

In some securitisation structures, rather than the assets being assigned by the originator to one or more SPVs, the assets are instead assigned to a trustee, which grants a beneficial interest in the assets held under the trust to one or more SPVs set up to act as investor beneficiaries. A separate SPV will normally issue the bonds to third party investors, and will loan the proceeds of the issue to the investor beneficiary SPV. A trust of this type is commonly referred to a ‘Receivables Trust’ or a ‘Master Trust’, and is often used where it is desired to securitise a large pool of assets over a period of time (as with a large-scale residential mortgage originator), or where the assets are short-term debts that are continually replaced by new debts arising on the same accounts (as with credit card receivables).

Such structures allow assets to be transferred continuously into the trust as and when they are originated. Fresh funding can then be raised from time to time by means of a new (or existing) issuer SPV raising funds in the market, and paying them, via the investor beneficiary SPV, to the trustee in return for the grant of a fresh tranche of beneficial entitlement in the pool of assets held by the trust.

The originator will normally also hold a beneficial interest under the trust, representing the portion of the asset pool that has not yet been funded by securitisation, and also carrying the originator’s right to profit extraction from the portion of the asset pool that has been securitised. Where an SPV makes a payment to the trustee to purchase a tranche of beneficial entitlement the trustee will use the funds so received to make payments to the originator, either by purchasing further assets from the originator or be ‘paying down’ the originator’s own interest in the trust.

See the diagram at CFM72060.