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Finance Act 2011, Cross Heading: Netting: non-UK allocated equity and liabilities is up to date with all changes known to be in force on or before 24 September 2024. There are changes that may be brought into force at a future date. Changes that have been made appear in the content and are referenced with annotations.
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Textual Amendments
F1Sch. 19 paras. 15-15Z5 and cross-headings substituted for Sch. 19 paras. 15-23 (with effect in accordance with Sch. 9 para. 35 of the amending Act) by Finance Act 2018 (c. 3), Sch. 9 para. 2
15Z3(1)Paragraph 15Z4 applies for the purposes of Steps 1 and 2 in paragraph 15Z1 if—U.K.
(a)the designated FPE entity mentioned in paragraph 15Z1 (“E”) has liabilities to another entity which (in a case where the bank levy is charged as provided for by paragraph 4 (groups)) is not within sub-paragraph (5) (“E’s liabilities”),
(b)E recognises, as assets, amounts due from that other entity (“N”) to E (“N’s liabilities”),
(c)there is in place an agreement between E and N which makes net settlement provision, and
(d)that provision is legally effective and enforceable.
(2)In sub-paragraph (1)(c), “net settlement provision” means provision for there to be a single net settlement—
(a)if a netting event occurs, or
(b)at the option of E or N, if a netting event occurs.
(3)The reference in sub-paragraph (2) to a “single net settlement” is a reference to a single net settlement of—
(a)all E’s liabilities (so far as covered by the provision mentioned in sub-paragraph (1)(c)) and
(b)all N’s liabilities (so far as covered by that provision).
(4)But a provision for there to be single net settlement—
(a)at the option of E, but not at the option of N, if a netting event occurs, or
(b)at the option of N, but not at the option of E, if a netting event occurs,
is not to be treated as a net settlement provision for the purposes of sub-paragraph (1)(c).
(5)An entity is within this sub-paragraph if it is—
(a)a UK resident entity which is a member of a UK sub-group,
(b)a chargeable UK resident entity, or
(c)a relevant foreign bank which is a member of the relevant group.
(6)For the purposes of sub-paragraph (1)—
(a)“agreement” includes an agreement which forms part of a multi-lateral agreement, arrangement or trading facility,
(b)references to amounts due from N include securities provided by E to N as collateral, but only where E recognises those securities in its balance sheet or statement of financial position, and
(c)“a netting event occurs”—
(i)in relation to E, if the insolvency or bankruptcy of E gives rise to the termination of any arrangements under which any liability covered by the provision mentioned in sub-paragraph (1)(c) arises, or
(ii)in relation to N, if the insolvency or bankruptcy of N gives rise to the termination of any arrangements under which such a liability arises.
(7)Section 556 of CTA 2009 (meaning of securities and similar securities) applies for the purposes of sub-paragraph (6) as it applies for the purposes of Chapter 10 of Part 6 of that Act.
15Z4(1)In determining the amount of E’s assets at Step 1 in paragraph 15Z1, the amount of E’s net settlement assets is to be reduced (but not below nil) by the amount of E’s net settlement liabilities.U.K.
(2)In determining the amount of the foreign permanent establishment’s assets at Step 2 in paragraph 15Z1—
(a)the reduction in E’s assets under sub-paragraph (1) is to be ignored, but
(b)the amount of the foreign permanent establishment’s net settlement assets is to be reduced by Z%.
(3)For this purpose, “Z%” is the proportion by which E’s net settlement assets are reduced under sub-paragraph (1).
(4)E’s “net settlement liabilities” are E’s liabilities so far as they—
(a)are covered by the provision mentioned in paragraph 15Z3(1)(c), and
(b)are not excluded liabilities.
(5)E’s “net settlement assets” are E’s assets so far as corresponding to N’s net settlement liabilities.
(6)“N’s net settlement liabilities” means N’s liabilities so far as they are covered by the provision mentioned in sub-paragraph 15Z3(1)(c).
(7)The permanent establishment’s “net settlement assets” are its assets so far as they are part of E’s net settlement assets.]
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