Finance Act 2007

Section 47

SCHEDULE 14 U.K. Sale and repurchase of securities: minor and consequential amendments

Income and Corporation Taxes Act 1988 (c. 1) U.K.

1 U.K. ICTA is amended as follows.

2 (1) Section 231AA (no tax credit for borrower under stock lending arrangement or interim holder under repurchase agreement) is amended as follows. U.K.

(2) In subsection (1)—

(a) for “the interim holder under a repurchase agreement” substitute “ the lender under a creditor repo or creditor quasi-repo ”, and

(b) for “or agreement” (in both places) substitute “ or repo in question ”.

(3) For subsection (3) substitute—

“(3) In this section creditor repo and “creditor quasi-repo” have the meaning given by Schedule 13 to the Finance Act 2007.”

(4) In subsection (4), omit “or 737A(5)”.

(5) After that subsection insert—

“(5) For the purposes of this section a person is taken to have paid a manufactured dividend representative of a distribution in respect of securities to which a creditor repo relates if (as a result of paragraph 13(1) of Schedule 13 to the Finance Act 2007) the person is treated for the purposes of Chapter 9 of Part 15 of ITA 2007 as making a payment which is representative of the income payable on the securities.”

Commencement Information

I1 Sch. 14 para. 2 in force at 1.10.2007 for the purposes of the amendments made by that paragraph, with effect in relation to an arrangement that comes into force on or after 1.10.2007 by S.I. 2007/2483, art. 3

3 (1) Section 231AB (no tax credit for original owner under repurchase agreement in respect of certain manufactured dividends) is amended as follows. U.K.

(2) In subsection (1), for paragraphs (a) to (c) substitute—

“(a) the person is the borrower under a debtor repo or debtor quasi-repo;

(b) the qualifying distribution is a manufactured dividend paid to the borrower in consequence of that repo; and

(c) the arrangement or arrangements in relation to that repo are not such that the actual dividend which the manufactured dividend represents is receivable otherwise than by the borrower under that repo.”

(3) For subsection (2) substitute—

“(2) In this section “debtor repo” and “debtor quasi-repo” have the meaning given by Schedule 13 to the Finance Act 2007.”

Commencement Information

I2 Sch. 14 para. 3 in force at 1.10.2007 for the purposes of the amendments made by that paragraph, with effect in relation to an arrangement that comes into force on or after 1.10.2007 by S.I. 2007/2483, art. 3

4 U.K. Omit sections 730A and 730B (treatment of price differential on sale and repurchase of securities).

Commencement Information

I3 Sch. 14 para. 4 in force at 1.10.2007 for the purposes of the amendments made by that paragraph, with effect in relation to an arrangement that comes into force on or after 1.10.2007 by S.I. 2007/2483, art. 3

5 U.K. Omit section 730BB (exchange gains and losses on sale and repurchase of securities).

Commencement Information

I4 Sch. 14 para. 5 in force at 1.10.2007 for the purposes of the amendment made by that paragraph, with effect in relation to an arrangement that comes into force on or after 1.10.2007 by S.I. 2007/2483, art. 3

F1 6 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1 Sch. 14 para. 6 omitted (with effect in accordance with s. 66(8) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 66(4)(m)

7 U.K. Omit sections 737A to 737C (sale and repurchase of securities: deemed manufactured payments).

Commencement Information

I5 Sch. 14 para. 7 in force at 1.10.2007 for the purposes of the amendments made by that paragraph, with effect in relation to an arrangement that comes into force on or after 1.10.2007 by S.I. 2007/2483, art. 3

8 U.K. Omit section 737E (power to modify sections 730A, 730BB and 737A to 737C).

Commencement Information

I6 Sch. 14 para. 8 in force at 1.10.2007 for the purposes of the amendment made by that paragraph, with effect in relation to an arrangement that comes into force on or after 1.10.2007 by S.I. 2007/2483, art. 3

9 U.K. In section 774E(4) (exceptions to sections 774B and 774D), for paragraph (b) (together with the “or” at the end of it) substitute—

“(b) Schedule 13 to the Finance Act 2007 (sale and repurchase of securities) applies, or”.

Commencement Information

I7 Sch. 14 para. 9 in force at 1.10.2007 for the purposes of the amendment made by that paragraph, with effect in relation to an arrangement that comes into force on or after 1.10.2007 by S.I. 2007/2483, art. 3

10 U.K. In section 807A (disposals and acquisitions of company loan relationships with or without interest), for subsection (6A) substitute—

“(6A) In this section “repo or stock-lending arrangements” means—

(a) a debtor repo within the meaning of paragraph 2 of Schedule 13 to the Finance Act 2007, or

(b) a stock lending arrangement within the meaning of section 263B of the 1992 Act.

(6B) In any case where a debtor repo within the meaning of that paragraph constitutes the repo or stock-lending arrangements—

(a) a reference in this section, in relation to those arrangements, to the initial transfer is to the sale mentioned in condition C of that paragraph; and

(b) a reference in this section, in relation to those arrangements, to the period for which they have effect is to the period from the making of the initial transfer until the earlier of the time when the subsequent purchase mentioned in condition D of that paragraph takes place and the time when it becomes apparent that that subsequent purchase will not take place.

(6C) In any case where a stock lending arrangement within the meaning of section 263B of the 1992 Act constitutes the repo or stock-lending arrangements—

(a) a reference in this section, in relation to those arrangements, to the initial transfer is to the transfer mentioned in subsection (1)(a) of that section; and

(b) a reference in this section, in relation to those arrangements, to the period for which they have effect is to the period from the making of the initial transfer until the earlier of the time when the transfer mentioned in subsection (1)(b) of that section takes place and the time when it becomes apparent that that transfer will not take place.”

Commencement Information

I8 Sch. 14 para. 10 in force at 1.10.2007 for the purposes of the amendment made by that paragraph, with effect as mentioned in art. 4 of the commencing S.I. by S.I. 2007/2483, art. 4

Taxation of Chargeable Gains Act 1992 (c. 12) U.K.

11 U.K. TCGA 1992 is amended as follows.

12 (1) Section 263A (agreements for sale and repurchase of securities) is amended as follows. U.K.

(2) In subsection (1), for the words from the beginning to “were different” substitute “ Subject to subsections (3) and (4) below, in any case falling within section 607(1) of ITA 2007 (treatment of price differences under repos) ”.

(3) After that subsection insert—

“(1A) If, at any time after the acquisition mentioned in subsection (1)(a) above, it becomes apparent that the interim holder will not dispose of the securities to the repurchaser, the interim holder shall be treated for the purposes of capital gains tax as acquiring them at that time for a consideration equal to their market value at that time.

(1B) If, at any time after the disposal mentioned in subsection (1)(b) above, it becomes apparent that the original owner will not acquire the securities as the repurchaser, the original owner shall be treated for the purposes of capital gains tax as disposing of them at that time for a consideration equal to their market value at that time.”

(4) Omit subsection (2).

(5) For subsections (5) and (6) substitute—

“(5) Expressions used in this section and section 607 of ITA 2007 have the same meaning in this section as in that section.

(6) This section does not apply for the purposes of corporation tax in respect of chargeable gains.”

(6) The heading accordingly becomes “ Agreements for sale and repurchase of securities: capital gains tax ”.

Commencement Information

I9 Sch. 14 para. 12 in force at 1.10.2007 for the purposes of the amendments made by that paragraph, with effect in relation to an arrangement that comes into force on or after 1.10.2007 by S.I. 2007/2483, art. 3

13 (1) For paragraph 12 of Schedule 7AC substitute— U.K.

“12 (1) This paragraph applies where—

(a) a company (“the borrower”) which holds shares in another company sells the shares under an arrangement by reference to which the borrower has a debtor repo, and

(b) by virtue of paragraph 6 of Schedule 13 to the Finance Act 2007 (sale and repurchase of securities) the sale is ignored for the purposes of corporation tax in respect of chargeable gains.

(2) For the period for which the arrangement is in force—

(a) the borrower shall be treated for the purposes of this Part as continuing to hold the shares and accordingly as retaining its entitlement to any rights attaching to them, and

(b) the lender shall be treated for those purposes as not holding the shares and as not becoming entitled to any such rights.

This is subject to the following qualification.

(3) If at any time before the end of that period the borrower, or another member of the same group as the borrower, becomes the holder—

(a) of any of the shares, or

(b) of any shares directly or indirectly representing any of them,

sub-paragraph (2) does not apply after that time in relation to those shares or, as the case may be, the shares represented by them.

(4) Expressions used in this paragraph and in Schedule 13 to the Finance Act 2007 have the same meaning in this paragraph as in that Schedule.”

Commencement Information

I10 Sch. 14 para. 13 in force at 1.10.2007 for the purposes of the amendments made by that paragraph, with effect in relation to an arrangement that comes into force on or after 1.10.2007 by S.I. 2007/2483, art. 3

Finance Act 1996 (c. 8) U.K.

F2 14 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F2 Sch. 14 paras. 14-18 repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F2 15 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F2 Sch. 14 paras. 14-18 repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F2 16 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F2 Sch. 14 paras. 14-18 repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F2 17 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F2 Sch. 14 paras. 14-18 repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F2 18 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F2 Sch. 14 paras. 14-18 repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

Finance Act 1994 (c. 9) U.K.

19 U.K. In section 229(1)(ca) of FA 1994 (Lloyd's corporate members: regulations), for sub-paragraph (ii) substitute—

“(ii) arrangements involving repos (within the meaning of paragraph 15 of Schedule 13 to the Finance Act 2007) or redemption arrangements (within the meaning of that paragraph);”.

Commencement Information

I11 Sch. 14 para. 19 in force at 1.10.2007 for the purposes of the amendment made by that paragraph, with effect in relation to an arrangement that comes into force on or after 1.10.2007 by S.I. 2007/2483, art. 3

Finance Act 2006 (c. 25) U.K.

20 U.K. In section 139 of FA 2006 (Real Estate Investment Trusts: manufactured dividends), omit subsection (5).

Commencement Information

I12 Sch. 14 para. 20 in force at 1.10.2007 for the purposes of the amendment made by that paragraph, with effect in relation to an arrangement that comes into force on or after 1.10.2007 by S.I. 2007/2483, art. 3

Income Tax Act 2007 (c. 3) U.K.

21 U.K. ITA 2007 is amended as follows.

22 U.K. In section 602(1)(b) (deemed manufactured payments: repos), for “the repurchase price of the securities became due” substitute “ the distribution was payable ”.

Commencement Information

I13 Sch. 14 para. 22 in force at 1.10.2007 for the purposes of the amendment made by that paragraph, with effect in relation to an arrangement that comes into force on or after 1.10.2007 by S.I. 2007/2483, art. 3

23 U.K. In section 607 (treatment of price differences under repos), after subsection (7) insert—

“(7A) A company within the charge to corporation tax is not to be treated as a result of this section as making any payment of interest for income tax purposes.”

Commencement Information

I14 Sch. 14 para. 23 in force at 1.10.2007 for the purposes of the amendment made by that paragraph, with effect in relation to an arrangement that comes into force on or after 1.10.2007 by S.I. 2007/2483, art. 3

24 U.K. In section 886(2) (interest paid by recognised clearing houses etc), after “repos)” insert “ , or paragraph 5 of Schedule 13 to FA 2007 (relief for borrower for finance charges in case of debtor repos and debtor quasi-repos), ”.

Commencement Information

I15 Sch. 14 para. 24 in force at 1.10.2007 for the purposes of the amendment made by that paragraph, with effect in relation to an arrangement that comes into force on or after 1.10.2007 by S.I. 2007/2483, art. 3