CFM72620 – Corporate Finance Manual – HMRC Internal Manual

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Commencement and termination as a securitization company

A new company created from January 1, 2007 as a securitization company will be subject to the regulations from the outset. The normal CTA09/PT2/CH2 rules regarding the start of an accounting period for corporation tax purposes will apply.

An “inactive company”, whether incorporated before or after January 1, 2007, but which becomes a party to a capital market agreement after that date, will start a new accounting period for tax purposes in accordance with Article 15 , paragraph 2, which inserts a new paragraph (k) in the rules of CTA09/S10(1). This requires that a new accounting period for corporation tax purposes begins or ends when the company becomes subject to taxation as a securitization company. The same will apply in the (less probable) case of a company with an existing activity (and corporate tax accounting periods) which was not a securitization company before 1 January 2007 and which becomes one after this date.

Regulation 15 also has the effect that when a securitization company ceases to be eligible for the scheme, its accounting period will end and a new one will begin. For its new accounting years, it will be taxed according to its accounts.

However, in the case (which is likely to be exceptional in practice) where a company ceases to be a securitization company within the meaning of the regulations, but still falls within the definition of a securitization company within the meaning of FA05/ S83, it will be taxed for its new accounting periods on the basis of old UK GAAP. This could happen if (for example) a holding company which previously held only “financial assets” (CFM72350 and CFM72355) were to acquire non-financial assets which became part of the collateral of the capital market framework.

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