What types of entity are classified as a 'financial institution' under section 151I of the Taxation of Chargeable Gains Act 1992?

Section 151I defines financial institutions as UK banks (per CTA 2010 section 1120), building societies, their wholly-owned subsidiaries, persons with FCA Part 4A permission for credit agreements or hire contracts, certain bond-issuers under alternative finance arrangements, overseas deposit-takers and credit-granters, overseas and UK insurers (excluding insurance special purpose vehicles).

How does section 151I define a wholly-owned subsidiary of a bank or building society?

A company is a wholly-owned subsidiary of a bank or building society only if its sole members are the parent itself, persons acting on the parent's behalf, the parent's own wholly-owned subsidiaries, or persons acting on behalf of those subsidiaries. If any outside investor holds even a single share in its own right, the company fails the test.

When does a bond-issuer qualify as a financial institution under section 151I?

A bond-issuer within the meaning of section 151N qualifies as a financial institution only where its bond assets consist of rights under purchase and resale arrangements, diminishing shared ownership arrangements, or profit share agency arrangements. The bond-issuer is not automatically a financial institution for all its activities — only where bond assets take one of those specified alternative finance forms.

Are overseas banks and insurers included in the section 151I definition of financial institution?

Yes. Persons authorised outside the United Kingdom to accept deposits or repayable funds from the public and to grant credits for their own account are included. Overseas insurers authorised to effect or carry out contracts of insurance are also included, except for insurance special purpose vehicles as defined in section 139(1) of the Finance Act 2012.

Taxation of Chargeable Gains Act 1992 section 151I

Meaning of "financial institution"

Section 151I defines the types of entity that count as a "financial institution" for the purposes of the rules in this chapter on corporate bonds and similar securities.

The definition covers UK banks, building societies, their wholly-owned subsidiaries, and persons with FCA permission to enter into credit agreements or contracts for hire of goods.
Bond-issuers under alternative finance arrangements are included, but only where the bond assets are rights under purchase and resale, diminishing shared ownership, or profit share agency arrangements.
Overseas entities authorised to accept deposits from the public and grant credits for their own account, and overseas insurers (other than insurance special purpose vehicles) also fall within the definition.
A company qualifies as a wholly-owned subsidiary for these purposes only if its sole members are the parent bank or building society (or persons acting on its behalf) and any of that parent's own wholly-owned subsidiaries (or persons acting on their behalf).

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