Finance Act 2007

Relief for borrower for finance charges in respect of the advance: debtor repos and debtor quasi-repos

5 (1) This paragraph applies if a company (“the borrower”) has a debtor repo or a debtor quasi-repo.

(2) The advance under the debtor repo or debtor quasi-repo is, in the case of the borrower, to be treated for the purposes of the loan relationship rules as a money debt which—

(a) is owed by the borrower or, if the borrower is a member of a partnership which receives the advance, by the partnership, and

(b) is owed to the person to whom the securities are initially sold.

(3) The arrangement is, in the case of the borrower, to be treated for the purposes of those rules as a transaction for the lending of money from which that debt is treated as arising for those purposes.

(4) Any amount which, in accordance with generally accepted accounting practice, is recorded in—

(a) the accounts of the borrower, or

(b) if the borrower is a member of a partnership which receives the advance, the accounts of the partnership,

as a finance charge in respect of the advance is to be treated for the purposes of the loan relationship rules and Part 15 of ITA 2007 (deduction of income tax at source) as interest payable under that debt.

(5) That interest is to be treated for those purposes as paid at the earlier of—

(a) the time when the relevant repurchase takes place, and

(b) the time when it becomes apparent that that repurchase will not take place.

(6) For this purpose “the relevant repurchase” means—

(a) if the borrower has a debtor repo, the subsequent buying of the securities or similar securities, and

(b) if the borrower has a debtor quasi-repo, the subsequent buying of the securities or other securities by the borrower, the receipt of the asset from the borrower or (as the case may be) the discharge of the liability to the borrower.