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HMRC internal manual

Corporate Finance Manual

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Other tax rules on corporate finance: securitisation: periods beginning on or after 1 January 2005: the interim regime: continuation after 2008

The Securitisation Companies (Application of Section 83(1) of the Finance Act 2005: Accounting Standards) Regulations 2007

As originally enacted, FA05/S83 applied for periods of account ending before 1 January 2007. In FA 2006, this cut-off date was extended to periods ending before 1 January 2008. FA07/S59 introduced new subsections 7A and 7B into FA05/S83 which allows regulations to be made to continue the effect of section 83 beyond 2008. Regulations made under this power were laid in November 2007 and are The Securitisation Companies (Application of Section 83(1) of the Finance Act 2005: Accounting Standards) Regulations 2007 (SI2007/3338).

The Regulations provide that where FA05/S83 applied to a company for periods ending before 1 January 2008, and the company continues to be party to the capital market arrangement which brought it within section 83, then section 83 will continue to apply to it for periods ending on or after 1 January 2008 but before 1 January 2017.

However, a company may elect out of this treatment, before the end of its first period ending on or after 1 January 2008. If the company elects out, it will taxed on the basis of its statutory accounts in the usual way. This is subject to transitional rules. See CFM72270.

For periods ending after 1 January 2008, a company to which FA05/S83 applied before that date will, therefore, either:

  • remain within FA05/S83 and thus be taxed according to computations drawn up on the basis of old UK GAAP;
  • elect into the permanent regime for financial asset securitisations (if it makes the election within 18 months from the end of its first accounting period beginning on or after 1 January 2007 - CFM72330);
  • elect out of the extension of FA05/S83.

Where a company to which the continuation of FA05/S83 applies becomes party to a new CMA, it will be either subject to one of the permanent regimes (CFM72310) in respect of that CMA, or it will be taxed according to its statutory accounts. ‘Old UK GAAP’, that is, UK GAAP as it stood at 31 December 2004, will not apply to such a company. Being ‘party to a CMA’ before 1 January 2008 should be taken to encompass companies in warehouse arrangements and commercial paper-funded companies within FA05/S83.

A company to which FA05/S83 applies before 1 January 2008 can either elect into the permanent regime if it qualifies or elect out of the extension of FA05/S83. It cannot do both (Regulation 13A of the Taxation of Securitisation Companies Regulations 2006 (CFM72330).