The regulations extend the corporation tax treatment applied to securitisation companies taxed under section 83 of Finance Act 2005 for a further 20 years. This will ensure that they continue to be taxed on their actual cash profit, and not their accounting profit.

The UK securitisation market is one of the largest and most developed securitisation markets in Europe and an important source of finance for UK businesses. This measure ensures that the corporation tax rules on securitisation vehicles operate clearly thereby minimising the administrative burden on business. There are expected to be no additional compliance costs.

The draft legislation enables securitisation companies to continue basing their corporation tax calculations on UK accounting practice instead of international accounting standards.

The introduction of international accounting standards in 2005 led to increased instability of securitisation companies’ accounting profits, so an interim regime was introduced which allowed these companies to disregard the international accounting standards when working out their corporation tax liabilities.

By extending this interim regime the government says it will: ‘enable more securitisations to run their natural course and for affected companies within the interim regime to prepare their tax computations on a consistent basis.

‘The regulations will allow a company to elect out of this extension, enabling companies to be taxed instead on their statutory accounts under new accounting standards.’

The period of consultation on the draft legislation will close on 16 November 2016.

Draft legislation: Securitisation Companies (Application of Section 83(1) of the Finance Act 2005: Accounting Standards)(Amendment) Regulations 2016 is available here.