Income Tax Act 2007

607 Treatment of price differences under repos U.K.

(1) This section applies if—

(a) there is a repo in respect of securities, and

(b) under the repo, the original owner has transferred the securities to the interim holder.

(2) Any difference between the sale price of the securities and the repurchase price of the securities is treated for income tax purposes as follows.

(3) If the repurchase price is more than the sale price, the difference is treated as a payment of interest made by the repurchaser on a deemed loan from the interim holder of an amount equal to the sale price.

(4) If the sale price is more than the repurchase price, the difference is treated as a payment of interest made by the interim holder on a deemed loan from the repurchaser of an amount equal to the repurchase price.

(5) In either case, the payment of interest is treated for income tax purposes as—

(a) becoming due when the repurchase price becomes due, and

(b) paid when that price is paid.

(6) Subsection (7) applies in calculating the sale price for the purposes of this section if the repo involves the exercise of an option (see section 569(4)(b) and (c)).

(7) The amount of any consideration given for the option is—

(a) in a case falling within section 569(4)(b), added to what would otherwise be the price, and

(b) in a case falling within section 569(4)(c), subtracted from what would otherwise be the price.

(8) This section is subject to section 608 (exceptions) and Chapter 6 (powers to modify repo provisions: non-standard repo cases and redemption arrangements).