Home > PPF Levy Forum > Breaking News > Changes to PPF Guidance on Contingent Assets (January 2010)
Changes to PPF Guidance on Contingent Assets (January 2010)
The PPF has issued revised guidance in relation to PPF compliant contingent assets. This guidance applies with immediate effect and will therefore impact on 2010/11 PPF levies.
The PPF has confirmed that it will take account of the same types of contingent asset arrangements for 2010/11 levies as in previous years. The two key changes to the guidance compared with previous versions are:
1. Security provided over real estate (Type B(ii) contingent assets)
When recertifying a charge over a property, the accompanying valuation must not be more than 15 months old. In previous years, the valuation could have been up to 3 years old.
This represents an unwelcome additional expense as property valuations will need to be obtained more frequently. However, the PPF is willing to accept less formal “desktop” valuations. Where commercial properties valuations are much lower than the previous valuation, this may result in an increase in the 2010/11 PPF levy.
2. Guarantors from Hong Kong
For 2010/11 levy purposes, Hong Kong has been added to the list of countries in which entities can be domiciled in order to be a contingent asset guarantor. Companies domiciled in a country within the Organisation for Economic Cooperation and Development (OECD) and / or the European Union (EU) can already be contingent asset guarantors for PPF purposes.
For those corporate groups with a company based in Hong Kong, this change presents a new opportunity to provide a guarantee to the pension scheme and reduce the PPF levy.
Given the time it takes to put in place contingent assets, we strongly recommended that those considering this option commence the process as soon as possible. The deadline for submitting new or recertifying existing contingent assets is 31 March 2010.
Please note that there are no changes to the requirements on valuation dates for recertifying security over securities (Type B(iii) contingent assets). For quoted securities, these valuations should be no more than one month before the date of the relevant contingent asset certificate. In the case of unquoted securities, the valuation should be not more than three months before the date of the certificate.
For a letter of credit (Type C contingent asset), the date of expiry and the date by which it needs to be renewed will depend on the specific terms in the letter. Such details should be checked as soon as possible in case recertification is required.
From 2010/11 the PPF also requires that, for all new contingent assets, certification is accompanied by “evidence that the corporate benefit of entering into contingent asset agreements has been considered and established”.