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HMRC internal manual

Corporate Finance Manual

Other tax rules on corporate finance: securitisation: periods beginning on or after 1 January 2007: the regulations: the note-issuing company: incidental activities

Incidental activities

Incidental activities include activities that are incidental to the management of the assets. These include entering into derivative contracts to hedge the assets, borrowing money for short term liquidity, raising subordinated loans from the originator or from banks to fund the payment of expenses or establishing reserves against impairment losses, entering into agreements with third parties who provide services connected with the issuance of the capital market instruments, and ongoing administration of the securitised assets.

A company would not be excluded from the regime because of such activities. A trading activity involving any other activities than those mentioned would exclude a company from the regime. For example, the trading company whose income stream is securitised in a whole business securitisation could never be a securitisation company.

Equally, a group finance company with a range of borrowing activities as part of its overall responsibility for a group’s treasury function, which was party to a securitisation arrangement, could not be said to have non-qualifying activities which were only incidental to its involvement in the securitisation.

‘Acquiring’ an asset can be taken as including the creation of the asset in the first place.