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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 on or after 1 January 2007: the regulations: commencement

Regulation 1: commencement and the election into the regime

Regulation 1 states that the Regulations have effect for periods of account beginning on or after 1 January 2007.

Securitisation companies existing before the commencement of the Regulations

Regulation 13 specifies that a company that is already a ‘securitisation company’ before its commencement date under the regulations must elect into the regime in order to be within its scope. The election extends to a company which immediately before its commencement date is either

  • a company within FA05/S83, and thus taxed in accordance with former UK GAAP - CFM72210), or
  • a company that is not within FA05/S83 (for example, because it has wider business activities that take it outside the definition in FA05/S83) but which nevertheless is party to a capital market arrangement under which it issues securities.

In both cases, the company will be able to elect into the application of the regulations only if it satisfies all of the other normal conditions for the application of the regulations.

The second case will be rare in practice, since a company which fails to qualify for the application of FA05/S83 will normally fail to qualify for the application of the regulations (given that the scope of application of the regulations is in principle narrower than that of section 83). However, the second case might arise if, for example, a bond issuing company, before its commencement date, held an asset which caused it to be excluded from the application of section 83 but ceased to hold that asset after its commencement date.

A company that does not, or cannot, elect into the permanent regime will continue to be taxed under the interim provisions in FA05/S83 (if applicable), unless it elects out of the extension of FA05/S83 (CFM72260).

Regulation 13A means that a company within FA05/S83 can either elect out of the extension of FA05/S83 or elect into the permanent regime - it cannot do both.

The election into the regime must be made within 18 months of the end of the first accounting period beginning on or after 1 January 2007, and is irrevocable.

Elections by note-issuing companies

As explained in CFM72380, the note-issuing company is the key entity in the securitisation arrangements, and other companies in the structure come within the regulations by reference to their relationship with it. If a note-issuing company within the interim regime in FA05/S83 does not make an election into the permanent regime, the other companies will not come within the regulations, even if those other companies make elections.

However, a note-issuer that is not within the charge to corporation tax (for example, because it is non-resident), and therefore does not have an accounting period for tax purposes, does not have to make an election in order to come within the definition of a note-issuing company. (In addition, a note-issuer which is outside the charge to corporation tax does not need to satisfy the ‘retained profit’ condition (CFM72370), or the ‘payments condition’ (CFM72390) in order to satisfy the definition of a note-issuing company.) Other companies in the structure can be securitisation companies within the regulations provided they elect in.

New securitisation companies beginning on or after 1 January 2007

Companies with accounting periods beginning on or after 1 January 2007, which meet the conditions in these regulations, and were not party to a securitisation before their commencement dates are automatically and mandatorily taxed under the permanent regime.