Finance Act 2007

Ignoring purchase and subsequent sale for purposes of chargeable gains: creditor repos

11 (1) This paragraph applies if—

(a) a company (“the lender”) has a creditor repo, and

(b) the lender (having bought the securities under the arrangement from the borrower) is the only person with the right or obligation under the arrangement to sell those or similar securities at any subsequent time.

(2) The purchase of the securities, and the subsequent sale of those or similar securities, by the lender under the arrangement are to be ignored for the purposes of corporation tax in respect of chargeable gains (but see sub-paragraph (5)).

(3) If at any time after the initial purchase of the securities—

(a) it becomes apparent that the lender will not subsequently sell those or similar securities under the arrangement, or

(b) the accounting condition ceases to be met,

the lender is to be treated for the purposes of corporation tax in respect of chargeable gains as acquiring the securities at that time for a consideration equal to their market value at that time.

(4) The accounting condition ceases to be met if, in accordance with generally accepted accounting practice, the accounts of the lender for any period after the one in which the advance is made do not record a financial asset in respect of the advance (except as a result of the subsequent sale of the securities or similar securities).

(5) If sub-paragraph (3) applies because the accounting condition ceases to be met, any subsequent sale of those or similar securities by the lender under the arrangement is not to be ignored for the purposes of corporation tax in respect of chargeable gains as a result of this paragraph.

(6) For the purposes of this paragraph references to the lender include a partnership of which the lender is a member.