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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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Other tax rules on corporate finance: securitisation: periods beginning on or after 1 January 2007: the regulations: the corporation tax charge: applies instead of the normal CT rules

The Regulation 14 charge applies instead of the normal CT charge

Regulation 14(4) provides that the amount taxed under the securitisation regime is instead of any other amount that would be taxed. In other words, the normal tax rules that apply to the computation of a company’s profits apply, but the amount actually taxed is in accordance with Regulation 14. If the company falls out of the regime, it will revert to the normal CT tax charge, except for those cases where it reverts to being taxed under the rules in the interim regime under FA05/S83 (CFM72210).

For the purposes of making CTSA returns the company will simply substitute the profit arrived at under Regulation 14 for the normal tax-adjusted profit or loss per the accounts.

This also means that certain tax rules have to be amended or ‘switched off’ in order to ensure that the treatment of transactions between a securitisation company a company taxed according to the normal CT rules is consistent with the tax charge which is applicable to the securitisation company under the regulations. Regulations 15 to 20 set out these amendments (CFM72630).

Double taxation treaties

The ‘interest article’ of Double Taxation treaties frequently requires a lender/creditor to be within the charge to tax in respect of interest payments, where the payer wishes to claim the benefit of paying interest gross under the terms of the treaty. The tax charge on a securitisation company under Regulation 14 includes any interest payment it receives from a non-UK borrower. Any treaty claim must of course be made to the other Contracting State, and it is for that State to decide whether the terms of the treaty are satisfied.