Taxation of Chargeable Gains Act 1992

[F1 Effect of repurchase agreement U.K.

Textual Amendments

F1 Sch. 7AC inserted (with effect in accordance with s. 44(3)(4) of the amending Act) by Finance Act 2002 (c. 23), Sch. 8 para. 1

12 (1) This paragraph applies where— U.K.

(a) a company that holds shares in another company transfers the shares under a repurchase agreement, and

(b) by virtue of section 263A(1) (agreements for sale and repurchase of securities) the disposal is disregarded for the purposes of the enactments relating to chargeable gains.

(2) During the period of the repurchase agreement—

(a) the original owner shall be treated for the purposes of this Part as continuing to hold the shares transferred and accordingly as retaining his entitlement to any rights attached to them, and

(b) the interim holder shall be treated for those purposes as not holding the shares transferred 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 the period of the repurchase agreement the original owner, or another member of the same group as the original owner, becomes the holder—

(a) of any of the shares transferred, or

(b) of any shares directly or indirectly representing any of the shares transferred,

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

(4) In this paragraph a “repurchase agreement” means an agreement under which—

(a) a person (“the original owner”) transfers shares to another person (“the interim holder”) under an agreement to sell them, and

(b) the original owner or a person connected with him is required to buy them back either—

(i) in pursuance of an obligation to do so imposed by that agreement or by any related agreement, or

(ii) in consequence of the exercise of an option acquired under that agreement or any related agreement.

For the purposes of paragraph (b) agreements are related if they are entered into in pursuance of the same arrangements (regardless of the date on which either agreement is entered into).

(5) Any reference in this paragraph to the period of a repurchase agreement is to the period beginning with the transfer of the shares by the original owner to the interim holder and ending with the repurchase of the shares in pursuance of the agreement.]