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HMRC internal manual

Corporate Finance Manual

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HM Revenue & Customs
Updated
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Old rules: asset-linked securities pre 2005: conditions

Conditions for FA96/S93 to apply

This guidance applies to periods of account beginning before 1 January 2005 

FA96/S93 contained two conditions:

  • The loan relationship had to be linked to the value of a specific kind of chargeable asset (CFM82430);
  • The amount payable at the end of the term had to be equal to the amount of the loan adjusted by the relevant percentage change in the value of that underlying chargeable asset (CFM82440).

Where a loan relationship no longer satisfied these conditions, but is still held by the same company, there were special rules in FA96/S93B- see CFM82490.

Exceptions

S93 did not apply:

  • for creditors holding the security where its disposal would have been treated as an integral part of its trade;
  • for debtors issuing the security in the course of activities forming an integral part of its trade.

Such exceptions normally applied to banks, general insurance companies and securities dealers, but did not apply to life assurance companies taxed under the I minus E basis - FA96/SCH11/PARA1A.

Nor did S93 apply to loan relationships with a guaranteed return falling under FA96/S93A - see CFM82470.