UK Law and Practice Contributed by: Guy O’Keefe, Richard Jones, Oliver Wicker and Kate Patane, Slaughter and May
falls within a VAT exemption (such as the exemp - tions for financing transactions). Where this is not possible, the VAT incurred is likely to be an
• whether the assets sold should be derecog - nised from the originator’s balance sheet; and • whether the SPE should be consolidated as part of the originator’s group accounts. As for derecognition, a key consideration is typically whether the originator has sufficiently relinquished control over the sold assets. This requires particular care in the case of whole loan/forward flow funding transactions (which, although not strictly securitisations, pro - vide analogous asset backed funding), where accountants will often require that the purchaser is able to trigger perfection of legal title to the receivables, sell the receivables on and appoint an alternative servicer. Care is required to assess the impact of the exercise of any such rights on, for example, any originators’ entitlement to deferred consideration. 8.2 Dealing With Legal Issues Legal opinions as to “true sale”, the SPE’s inde - pendence and bankruptcy-remote status and the legal enforceability of transaction documents are the principal interaction between lawyers and these accounting issues. Accountants are likely to use such opinions when drawing conclusions and advising the originator, but it is uncommon for lawyers to directly opine on the accounting treatment of a given transaction.
additional cost of the securitisation. 7.5 Obtaining Legal Opinions
The tax lawyers acting for the SPE/arrangers are commonly required to give a tax opinion addressed to the SPE, the trustee acting for the noteholders, and the arrangers. The material conclusions will generally be that: • the SPE should be chargeable to corporation tax only on the retained profit; • there should be no requirement to withhold UK income tax from payments of interest on the securitised assets and the securities issued by the SPE; and • no VAT or stamp duty should be chargeable on the acquisition of the securitised assets by the SPE nor on the issue or transfer of notes by the SPE. The tax opinion(s) will make a number of factual assumptions based on the transaction docu - mentation. 8. Accounting Rules and Issues 8.1 Legal Issues With Securitisation Accounting Rules Originators will typically obtain accounting advice to ensure the desired accounting treat - ment of the securitisation is achieved. The accounting treatment that is desired and is achievable varies from transaction to transac - tion, but key considerations include:
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