2007 No. 3402
corporation tax

The Taxation of Insurance Securitisation Companies Regulations 2007

Made
Laid before the House of Commons
Coming into force
The Treasury make the following Regulations in exercise of the power conferred by section 84 of the Finance Act 20051.

Preliminary

Citation, commencement and effect1.

(1)

These Regulations may be cited as the Taxation of Insurance Securitisation Companies Regulations 2007 and shall come into force on 28th December 2007 immediately after the coming into force of the Taxation of Securitisation Companies (Amendment No. 2) Regulations 20072.

(2)

These Regulations have effect from the beginning of periods of account beginning on or after 1st January 2007 and current on 4th December 2007.

Interpretation2.

(1)

In these Regulations—

“capital market arrangement” and “capital market investment” have the same meaning as in section 72B(1) of the Insolvency Act 19863 (see paragraphs 1, 2 and 3 of Schedule 2A to that Act);
“ICTA” means the Income and Corporation Taxes Act 19884;

“independent persons” means persons who are not connected with a company (and see paragraph (2));

“insurance special purpose vehicle” and “Insurance Prudential Sourcebook” have the same meanings as in section 431(2) of ICTA5.

(2)

Section 839 of ICTA6 (connected persons) applies for the purposes of the definition of “independent persons”, except that in applying the definition of “control” in that section a person is not to be treated as a participator in a company by reason only that he is a loan creditor of the company.

Scope of these Regulations3.

(1)

These Regulations make provision as to the application of the Corporation Tax Acts in relation to an insurance securitisation company.

(2)

The Regulations deal with the following matters—

(a)

they define “insurance securitisation company” (see regulation 4);

(b)

they provide that the Regulations do not apply if an insurance securitisation company has an unallowable purpose (see regulation 5);

(c)

they make provision for the application of accounting standards to an insurance securitisation company (see regulation 6);

(d)

they make supplementary provision in relation to the application, modification and non-application of provisions of the Corporation Tax Acts (see regulations 7 to 11).

Insurance securitisation companies

Meaning of insurance securitisation company4.

(1)

For the purposes of these Regulations an “insurance securitisation company” means a company that is an insurance special purpose vehicle and—

(a)

meets conditions A to C, or

(b)

whose liabilities representing debtor relationships are owed wholly or mainly to a note-issuing company or intermediate borrowing company within the Taxation of Securitisation Companies Regulations 20067.

(2)

Condition A is that the company is within section 84(2)(a) of the Finance Act 2005.

(3)

Condition B is that the securities that represent the capital market investment referred to in section 84(2)(a)(ii) of that Act are issued wholly or mainly to independent persons.

(4)

Condition C is that the total value of the capital market investments made under the capital market arrangement referred to in section 84(2)(a)(iii) of that Act is at least £10 million.

Insurance securitisation companies that have an unallowable purpose5.

(1)

These Regulations do not apply or will cease to apply to an insurance securitisation company that—

(a)

has an unallowable purpose, or

(b)

at any time has had an unallowable purpose.

(2)

Where these Regulations cease to apply by virtue of this regulation the accounting period of the company shall end.

(3)

For the purpose of these Regulations an insurance securitisation company has an unallowable purpose if the purpose for which the 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 company.

(4)

If one of the purposes for which an insurance 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 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.

(5)

For the purpose of this regulation—

(a)

one or more transactions are to be regarded as related transactions, in the case of any arrangements, if it would be reasonable to assume, from either or both of—

(i)

the likely effect of the transactions, and

(ii)

the circumstances in which the transactions are entered into or effected,

that none of the transactions would have been entered into or effected independently of the arrangements; and

(b)

transactions are not prevented from being related transactions, in the case of any arrangements, just because the transactions—

(i)

are not between the same parties, or

(ii)

are not between the parties to the capital market arrangements.

(6)

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 840ZA of ICTA (tax avoidance) 8.

Application of accounting standards to insurance securitisation companies6.

For the purposes of the Corporation Tax Acts as they apply to an insurance securitisation company, generally accepted accounting practice shall be taken to be UK generally accepted accounting practice as it applied for a period of account ending on 31 December 2006 but excluding the application of Financial Reporting Standard 26 issued in December 2004 by the Accounting Standards Board.

Supplementary provisions

Application, modification and non-application of provisions of the Corporation Tax Acts7.

In relation to an insurance securitisation company the provisions of the Corporation Tax Acts have effect in accordance with regulations 8 to 11.

ICTA8.

(1)

ICTA has effect as follows.

(2)

In section 209(2) (meaning of distribution)9 paragraphs (b) to (f) shall not apply in relation to any interest paid or other distribution made by an insurance securitisation company.

(3)

For the purposes of Chapter 4 of Part 10 (group relief) an insurance securitisation company shall not be treated as the member of any group or consortium.

The Taxation of Chargeable Gains Act 19929.

(1)

Taxation of Chargeable Gains Act 199210 has effect as follows.

(2)

Section 171 (transfers within a group: general provisions)11 shall not apply if “company B” in subsection (1) of that section is an insurance securitisation company.

(3)

Section 179A (reallocation within group of gain or loss accruing under section 179)12 shall not apply if “company C” in that section is an insurance securitisation company.

The Finance Act 199610.

(1)

The Finance Act 199613 has effect as follows.

(2)

In Schedule 9 (loan relationships: special computational provisions)—

(a)

paragraph 2 (late interest)14 shall not apply if the person standing in the position of a creditor as respects a loan relationship within that paragraph is an insurance securitisation company;

(b)

paragraph 12 (continuity of treatment: groups etc)15 shall not apply if the “transferee company” or “transferor company” in subparagraph (1) of that paragraph is an insurance securitisation company;

(c)

paragraph 17 (deeply discounted securities where companies have a connection) 16 shall not apply if the “issuing company” or the company standing in the position of a creditor in subparagraph (1) of that paragraph is an insurance securitisation company;

(d)

paragraph 18 (deeply discounted securities of companies)17 shall not apply if the “issuing company” or the company standing in the position of a creditor in subparagraph (1) of that paragraph is an insurance securitisation company.

The Finance Act 200211.

(1)

The Finance Act 200218 has effect as follows.

(2)

Paragraph 28 of Schedule 26 (derivative contracts: transactions within groups) shall not apply if the “transferee company” or “transferor company” in subparagraph (1) of that paragraph is an insurance securitisation company.

Alan Campbell
Steve McCabe
Two of the Lords Commissioners of Her Majesty’s Treasury
EXPLANATORY NOTE
(This note is not part of the Regulations)

These Regulations make provision as to the application of the Corporation Tax Acts in relation to an insurance securitisation company..

Regulation 1 provides for citation, commencement and effect. Authority for the limited retrospective effect is given by section 84(5)(b) of the Finance Act 2005 (c. 7).

Regulation 2 provides for the interpretation of a number of terms used in the Regulations.

Regulation 3 sets out the scope and application of the Regulations.

Regulation 4 defines an “insurance securitisation company”.

Regulation 5 provides that these Regulations do not apply to an insurance securitisation company which has, or has had, an unallowable purpose.

Regulation 6 provides that for the purposes of the Corporation Tax Acts as they apply to an insurance securitisation company, generally accepted accounting practice shall be taken to be UK generally accepted accounting practice as it applied for a period of account ending on 31 December 2006 but excluding the application of Financial Reporting Standard 26 issued in December 2004 by the Accounting Standards Board.

Regulations 7 to 11 make provision for the application, modification and non-application of provisions of the Corporation Tax Acts 1988.

Regulation 8 makes provisions in relation to the Income and Corporation Taxes Act 1988. Paragraph (2) disapplies parts of section 209 of the Income and Corporation Taxes Act 1988 (meaning of distribution) so only dividend payments by a securitisation company constitute “distributions” for the purposes of the Corporation Tax Acts. Paragraph (3)excludes group relief provisions in relation to securitisation companies.

Regulation 9 disapplies certain provisions relating to transactions within groups in the Taxation of Chargeable Gains Act 1992.

Regulation 10 disapplies provisions in Schedule 9 to the Finance Act 1996 (loan relationships: special computational provisions).

Regulation 11 disapplies provisions in Schedule 26 to the Finance Act 2002 (derivative contracts: transactions within groups).

A full regulatory impact assessment has not been produced for this instrument as no impact on the private or voluntary sectors is foreseen.