Commentary

D7.1307 Conditions to be met by securitisation companies

Corporate tax
Corporate tax | Commentary

D7.1307 Conditions to be met by securitisation companies

Corporate tax | Commentary

D7.1307 Conditions to be met by securitisation companies

In order for the special tax regime to apply a securitisation company must:

  1.  

    (a)     have provision for a 'retained profit'. The requirement to have a retained profit means that there must be provision for a retained profit under the documentation for the related capital market arrangement (CMA); as defined at D7.1306

  2.  

    (b)     satisfy the 'payments condition'1; and

  3.  

    (c)     meet the 'unallowable purposes test'2

If a company fails to meet these conditions the special corporation tax charge3, the removal of withholding obligation under ITA 2007, s 9014 and the modifications to the corporation tax rules5 will not apply to it. Such a company will still be a 'securitisation company' (unless it also falls outside the scope of the definitions described in D7.1306), but it will not be taxed in accordance with the special corporation tax charge.

Retained profit

'Retained profit' does not take its normal accountancy meaning of 'profit after tax and dividends'. It is the amount 'required by the CMA or a related transaction to be retained, made available to be retained, or designated as profits of the securitisation company (however described)'6. The requirement is for the terms of the CMA or a related transaction to include provision for the company to have a retained profit, not that it actually has a cash surplus in each accounting period. Nor is there any tax requirement for any particular minimum amount of retained profit that will be regarded as being acceptable for the purposes of the

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