The Taxation of Securitisation Companies (Amendment) Regulations 2022
Published 30 November 2021
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Who is likely to be affected
Securitisation companies who are taxed under the permanent securitisation tax regime and others concerned with securitisation arrangements, such as businesses who implement securitisations, investors, advisers and tax professionals.
General description of the measure
This measure will address uncertainty and complexity in the application of the permanent regime to a certain type of securitisation arrangements, ‘retained’ securitisation arrangements, by amending one of the qualification conditions. It will also reduce the level of a threshold required by another qualification condition in order to increase access to the regime. This will be achieved by amending existing regulations.
Further informal engagement is intended in relation to the scope of the permanent regime.
Policy objective
The government is keen to ensure that the UK’s tax regime for securitisation arrangements contributes to maintaining the UK’s position as a leading financial services centre. These changes will address uncertainty and complexity in the application of the permanent regime and will widen access to the regime.
Background to the measure
Securitisation is a widely used method of raising debt finance on the capital markets through the issue of asset-backed securities. It can also aid capital, liquidity and risk management. In securitisations, a special purpose vehicle (SPV) issues notes backed by the collateral of securitised assets.
A special tax regime, the permanent securitisation tax regime, came into effect on 1 January 2007 for the securitisation of financial assets, and has been amended a number of times since, principally to provide clarity and certainty on various points.
Following continuing dialogue with industry, a consultation document entitled ‘Reform of Taxation of Securitisation Companies’ was issued on 23 March 2021, for comments by 3 June 2021, covering a number of areas. The summary of responses, Reform of the taxation of securitisation companies, was published on 30 November 2021. This measure addresses the outcome of the consultation for 2 of the areas covered. A separate measure addresses the outcome of a third area covered in relation to Stamp Duty and Stamp Duty Reserve Tax (together, Stamp Taxes).
The government is now seeking comments on draft regulations, the Taxation of Securitisation Companies (Amendment) Regulations 2022, to implement the proposed changes. The government is also seeking comments on draft regulations in relation to proposed Stamp Taxes changes.
Detailed proposal
Operative date
The draft regulations are expected to come into force in Spring 2022. The measure will have effect for securities issued under a capital market arrangement entered into on or after the date the amended regulations come into force.
Current law
The current law is set out in Chapter 4, Part 13 of the Corporation Tax Act 2010 (CTA 2010), and in the Taxation of Securitisation Companies Regulations 2006 (statutory instrument 2006/3296), the ‘TSCR’, which contains the detailed rules.
Proposed revisions
Following a period for public comment on the draft regulations, a statutory instrument will be introduced to amend the TSCR. The TSCR will be amended by the following changes.
One of the conditions which a note-issuing SPV must meet to be a ‘note-issuing company’ within the regime is that it must issue its securities wholly or mainly to persons who are independent. These are persons who are not connected with the SPV. Currently, sections 1122 and 1123 of the CTA 2010, as modified by regulation 2(3) of the TSCR, are applied to determine connection. Accordingly, control is read in accordance with sections 450 and 451 of the CTA 2010, except where otherwise indicated. The amendments will mean that control is instead read in accordance with section 1124(2) of the CTA 2010 or, in the case of the note-issuing company, a modified version of section 1124(2) of the CTA 2010.
Another of the conditions which the note-issuing company must meet is that each note issuance must exceed a threshold amount at the point of issue. The current limit is £10 million. The amendments will reduce this to £5 million.
Summary of impacts
Exchequer impact (£million)
| 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 |
|---|---|---|---|---|---|
| Empty | Empty | Empty | Empty | Empty | Empty |
The final costing will be subject to scrutiny by the Office for Budget Responsibility, and will be set out at the next fiscal event.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
This measure is expected to have no impact on individuals as it only affects businesses.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not expected that there will be impacts for those in groups sharing protected characteristics.
Impact on business including civil society organisations
This measure will impact on those businesses, including civil society organisations, involved in securitisation arrangements by making parts of the regime more certain and simpler. It will also increase access to the regime, which is particularly likely to benefit civil society organisations.
This measure is expected to have a negligible impact on business administrative burdens. There will be a one-off cost of familiarisation with the new rules. This is expected to be minimal. There are expected to be no continuing costs. Customer experience could see an improvement given that this measure is expected to make parts of the regime more certain and simpler.
Operational impact (£million) (HMRC or other)
This measure is expected to have a negligible operational impact on HMRC or on others.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The impact of the measure will be kept under review through regular communication with affected taxpayer groups, primarily through their professional representatives and a securitisation industry consultative group.
Further advice
If you have any questions about this change, contact the Financial Products Team, HMRC on email: [email protected].
Declaration
John Glen MP, the Economic Secretary to the Treasury, has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.