16(1)This paragraph applies for the purposes of paragraph 15(2) if—U.K.
(a) a member (“M”) of the relevant group has liabilities to an entity (“N”) which is not a member of the group F1 . . . (“M's liabilities”),
[F2(b)M, or another member of the relevant group, recognises, as assets, amounts due from N or another entity which is not a member of the group (“N's liabilities”),]
(c)there is in place an agreement which makes provision for there to be a single net settlement of all M's liabilities, and liabilities of other members of the group to N or another entity which is not a member of the group, (so far as covered by the provision) and all N's liabilities (so far as covered by the provision) if the netting event occurs, and
(d)the provision mentioned in paragraph (c) is legally effective and enforceable.
(2)For the purposes of sub-paragraph (1)—
(a) “ agreement ” includes an agreement which forms part of a multi-lateral agreement, arrangement or trading facility,
[F3(b)references to amounts due from N or another entity which is not a member of the relevant group include securities provided by M, or another member of the relevant group, to N or another entity which is not a member of the relevant group as collateral, but only where M or another member of the relevant group recognises those securities in its balance sheet or statement of financial position, and]
(c)F4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d)“the netting event occurs” if the insolvency or bankruptcy of—
(i) M, or another member of the relevant group which has F5 . . . a liability covered by the provision mentioned in sub-paragraph (1)(c), or
(ii)N, or another entity which is not a member of the group and which has such a liability,
gives rise to the termination of any arrangements under which such a liability arises.
[F6Section 556 of CTA 2009 (meaning of securities and similar securities) applies for the purposes of this sub-paragraph as it applies for the purposes of Chapter 10 of Part 6 of that Act.]
(3)F7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4)The amount of M's net settlement liabilities is to be reduced (but not below nil) by the amount of M's net settlement assets.
(5) “ M's net settlement liabilities ” means M's liabilities so far as they—
(a)are covered by the provision mentioned in sub-paragraph (1)(c), and
(b)are not excluded liabilities.
(6) “ M's net settlement assets ” means the assets of M, or of another member of the relevant group, so far as corresponding to N's net settlement liabilities.
(7)But if this paragraph applies in relation to more than one member of the relevant group, no part of an asset may be included in the net settlement assets of more than one such member.
(8) “ N's net settlement liabilities ” means N's liabilities so far as they are covered by the provision mentioned in sub-paragraph (1)(c).
(9)If M's net settlement liabilities exceed M's net settlement assets, and a proportion (A%) of those liabilities is long term liabilities and a proportion (B%) of those liabilities is short term liabilities, under sub-paragraph (4)—
(a)the long term liabilities are reduced by A% of M's net settlement assets, and
(b)the short term liabilities are reduced by B% of those assets.
Textual Amendments
F1 Words in Sch. 19 para. 16(1)(a) omitted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by virtue of The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 3(2)(a)
F2 Sch. 19 para. 16(1)(b) substituted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 3(2)(b)
F3 Sch. 19 para. 16(2)(b) substituted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 3(3)(a)
F4 Sch. 19 para. 16(2)(c) and following word omitted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by virtue of The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 3(3)(b)
F5 Words in Sch. 19 para. 16(2)(d)(i) omitted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by virtue of The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 3(3)(c)
F6 Words after Sch. 19 para. 16(2)(d) inserted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by virtue of The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 3(3)(d)
F7 Sch. 19 para. 16(3) omitted (14.12.2011 with effect in relation to chargeable periods ending on or after 1.1.2011) by virtue of The Finance Act 2011 (Bank Levy: Amendment of Netting Agreements Provisions) Order 2011 (S.I. 2011/3015) , arts. 1(2) , 3(4)