The Taxation of Securitisation Companies Regulations 2006

Companies to which specified regulations do not apply

Securitisation companies that do not meet the payments condition

11.—(1) The specified regulations do not apply to a securitisation company that—

(a) does not meet the payments condition, or

(b) at any time has not met the payments condition.

(2) The payments condition is that in any accounting period R is equal to or less than the sum of P + RA + RP

(3) In paragraph (2)—

R is, subject to paragraph (6), the aggregate of—

(a)

amounts received by the securitisation company in the accounting period, and

(b)

amounts which have been—

(i)

retained as RA in that accounting period, or

(ii)

taken into account as RA for the purposes of this regulation in a previous accounting period,

where those amounts are no longer reasonably required to be retained as RA;

P is the aggregate amount of—

(a)

payments made by the securitisation company in the accounting period and the following 18 months except payments which have already been taken into account for the purposes of this regulation for a previous accounting period, and

(b)

payments made by the securitisation company in the previous accounting period but not taken into account for the purposes of this regulation;

RA is the aggregate of amounts retained by the securitisation company in the accounting period, which have not already been taken into account for the purposes of this regulation in a previous accounting period, which are reasonably required to—

(a)

provide for losses or expenses arising from the company’s business, or

(b)

maintain or enhance the company’s creditworthiness; and

RP is the amount of the retained profit of the securitisation company in the accounting period.

(4) If a securitisation company receives amounts or makes payments of amounts in a currency other than its functional currency, that amount shall be translated into the functional currency by reference to the appropriate exchange rate for the last day of the accounting period.

(5) For the purposes of this regulation the aggregate amount of payments made includes any payment which was not made but which would have been made but for—

(a) a legal prohibition, or

(b) a reasonable excuse for failing to make that payment,

but if any such payment is subsequently made it shall be disregarded.

(6) In the case of a company which has elected in accordance with regulation 13(2) that these Regulations shall apply—

(a) in the first accounting period to which these Regulations apply, R includes an amount that would be given by the formula—

R – P – RA – RP

in relation to the previous accounting period (“the relevant accounting period”);

(b) sub-paragraph (b)(ii) of the definition of R in paragraph (3) shall apply as if there were included in those amounts the aggregate of amounts retained by the company in previous accounting periods, in which these Regulations did not apply, which were reasonably required to—

(i) provide for losses or expenses arising from the company’s business, or

(ii) maintain or enhance the company’s creditworthiness.

(7) For the purposes of the formula in paragraph (6)(a)—

R is the aggregate of amounts received by the company in the relevant accounting period;

P is the aggregate amount of payments made by the company in the relevant accounting period;

RA is the aggregate of amounts retained by the company for the relevant accounting period which were reasonably required to—

(a) provide for losses or expenses arising from the company’s business, or

(b) maintain or enhance the company’s creditworthiness; and

RP is the amount that would be the retained profit of the company in the relevant accounting period if these Regulations applied.

(8) In this regulation—

“appropriate exchange rate” has the meaning given in section 92D(2)(b) of the Finance Act 1993(1);

“functional currency” has the meaning given in section 92E(3) of the Finance Act 1993(2);

“payment” includes part of a payment.

Securitisation companies that have an unallowable purpose

12.—(1) The specified regulations do not apply to a securitisation company that—

(a) has an unallowable purpose, or

(b) at any time has had an unallowable purpose.

(2) For the purpose of these Regulations a securitisation company has an unallowable purpose if the purpose for which the securitisation company is a party to—

(a) the capital market arrangement,

(b) any related transaction, or

(c) any transaction in pursuance of the capital market arrangement,

includes a purpose which is not amongst the business or other commercial purposes of the securitisation company.

(3) If one of the purposes for which a securitisation company is at any time a party to—

(a) any capital market arrangement,

(b) any related transaction in the case of any capital market arrangement, or

(c) any transaction in pursuance of any capital market arrangement,

is a tax avoidance purpose, that purpose shall be taken to be a business or other commercial purpose of the securitisation company only where it is not the main purpose, or one of the main purposes, for which the company is party to the arrangements or transaction at that time.

(4) In this regulation—

“tax avoidance purpose” means any purpose that consists in securing a tax advantage for any other person;

“tax advantage” has the same meaning as in section 709(1) of ICTA (tax avoidance).

(1)

1993 c. 34. Section 92D was inserted by section 52 of, and paragraph 77 of Schedule 10 to, the Finance Act 2004 (c. 12).

(2)

Section 92E was inserted by section 52 of, and paragraph 77 of Schedule 10 to, the Finance Act 2004.