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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: modifications to certain tax rules: derivative contracts

Derivative contracts

The derivative contracts rules in CTA09/PT8 will apply to companies outside the securitisation regime that have transactions with a securitisation company.

Intra-group transfers

Regulation 20 provides a similar rule to Regulation 19, in relation to derivative contracts. That is, the normal rule is that derivative contracts are transferred intra-group at their notional carrying value, under CTA09/PT7/CH5. But where the transfer is to a securitisation company, this rule is disapplied and the transfer will be at the derivative contract’s sale price, so that any profit or loss will arise in the transferor.

Exit charge on derivative contracts

There is a degrouping charge, equivalent to the loan relationships rule, in CTA09/S630, where a derivative contract is transferred intra-group under paragraph 28 and the company is later sold out of the group. Again, this has no impact where the contract is transferred after the commencement of the securitisation regime, because paragraph 28 will not have applied. But where the contract was transferred before 1 January 2007 and the securitisation company is later sold out of the group, Regulation 14(3) ensures that the degrouping charge arises in the usual way and is added to the Regulation 14 charge.