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HMRC internal manual

Corporate Finance Manual

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HM Revenue & Customs
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Other tax rules on corporate finance: securitisation: periods beginning before 1 January 2005

Tax issues: periods beginning before 1 January 2005

A plain, vanilla securitisation should not cause any major problems from a UK direct tax perspective.

It is usually expected that the SPVs will be able to use all cashflows from the securitised assets to pay funding costs and incidental costs and to pay any residue to the originator (apart from a nominal retained profit for the SPV itself). Therefore, this basis for securitisation will be undermined if the SPV has any tax liabilities other than corporation tax on its nominal profit. Consequently, the originator and investors (and ratings agencies) generally seek the highest level of certainty on the taxation of the SPV.

CFM72110 discusses a number of general points relating to tax issues for periods beginning before 1 January 2005. See CFM72120 on bad debts, and CFM72130 on tax issues relating to offshore SPVs. Many of these issues will continue to apply for periods beginning on or after 01 January 2005, but will not apply in periods beginning on or after 01 January 2007 where the SPVs are within the 2006 regulations (see CFM72300).

Until the legislation in FA05/S83 and S84, there was no specific tax legislation on securitisation structures in the UK. It follows that the tax treatment of the securitisation structures has been determined by the usual rules for UK corporate taxpayers.