Corporation Tax Act 2009

Debtor repos and debtor quasi-repos U.K.

548 Meaning of debtor repo U.K.

(1) For the purposes of this Chapter a company (“the borrower”) has a debtor repo if each of conditions A to E is met.

(2) Condition A is that under an arrangement the borrower receives from another person (“the lender”) any money or other asset (“the advance”).

(3) Condition B is that, in accordance with generally accepted accounting practice, the accounts of the borrower for the period in which the advance is received record a financial liability in respect of the advance.

(4) Condition C is that under the arrangement the borrower sells any securities at any time to the lender.

(5) Condition D is that the arrangement makes provision conferring a right or imposing an obligation on the borrower to buy those or similar securities at any subsequent time.

(6) Condition E is that, in accordance with generally accepted accounting practice, the subsequent buying of those or similar securities would extinguish the financial liability in respect of the advance recorded in the accounts of the borrower.

(7) For the purposes of conditions A to E references to the borrower include a firm of which the borrower is a member.

549 Meaning of debtor quasi-repo U.K.

(1) For the purposes of this Chapter a company (“the borrower”) has a debtor quasi-repo in any case if—

(a) the borrower does not have a debtor repo, and

(b) each of conditions A to E is met.

(2) Condition A is that under an arrangement the borrower receives any money or other asset (“the advance”).

(3) Condition B is that, in accordance with generally accepted accounting practice, the accounts of the borrower for the period in which the advance is received record a financial liability in respect of the advance.

(4) Condition C is that under that or any other arrangement the borrower [F1 or any other person] sells any securities at any time.

(5) Condition D is that the arrangement or other arrangement—

(a) makes provision conferring a right or imposing an obligation on the borrower to buy the securities or any other securities at any subsequent time, or

(b) makes provision conferring such a right or imposing such an obligation on any other person and makes other relevant provision.

(6) For this purpose any arrangement makes other relevant provision if it makes provision—

(a) for the receipt of any money or other asset from the borrower under that arrangement for the purpose of enabling the other person to make that subsequent purchase, or

(b) for the discharge of any liability to the borrower under that arrangement for that purpose (whether by way of set off or otherwise).

(7) Condition E is that, in accordance with generally accepted accounting practice—

(a) the subsequent buying of the securities or the other securities by the borrower, or

(b) the receipt of the asset from the borrower, or the discharge of the liability to the borrower, under the arrangement or other arrangement,

would extinguish the financial liability in respect of the advance recorded in the accounts of the borrower.

(8) For the purposes of conditions A to E references to the borrower include a firm of which the borrower is a member.

Textual Amendments

F1 Words in s. 549(4) inserted (1.4.2009 retrospective) by Corporation Tax Act 2009 (Amendment) Order 2009 (S.I. 2009/2860), arts. 1(2), 6(5)

550 Ignoring effect on borrower of sale of securities U.K.

(1) This section applies if a company (“the borrower”)—

(a) has a debtor repo or a debtor quasi-repo, or

(b) has a liability which is discharged under a relevant arrangement.

(2) A relevant arrangement is one—

(a) in relation to which conditions C and D in section 549 are met, and

(b) the main purpose or one of the main purposes of which is the obtaining of a tax advantage.

(3) For the purposes of the charge to corporation tax in respect of income of the borrower arising while the arrangement is in force, the Corporation Tax Acts apply as if—

(a) the borrower held the securities which are initially sold for any period for which the arrangement is in force, and

(b) the borrower did not receive in that period amounts representative of income payable in respect of the securities.

(4) Subsection (3) is subject to subsections (5) [F2 to (6)].

(5) No amount is to be charged to corporation tax as a result of subsection (3)(a) unless—

(a) it is, in accordance with generally accepted accounting practice, recognised in determining the borrower's profit or loss for that or any other period, or

(b) it is taken into account in calculating the amounts which are so recognised.

[F3 (5A) For the purposes of the charge to corporation tax, an amount representative of income payable in respect of the securities is not to be ignored as a result of subsection (3)(b) if—

(a) it is, in accordance with generally accepted accounting practice, recognised in determining the borrower's profit or loss for that or any other period, or

(b) it is taken into account in calculating the amounts which are so recognised.]

(6) If the securities which are initially sold are overseas securities, the entitlement of the borrower to double taxation relief in respect of any overseas dividend payable in respect of those securities is determined as if—

(a) subsection (3) were omitted,

(b) the borrower received a payment of an amount which is representative of that dividend,

(c) the payment were made under a requirement of the arrangement, and

(d) the payment were made on the date on which that dividend is payable.

(7) For the purposes of this section “double taxation relief” means any relief given under or as a result of Part 18 of ICTA.

Textual Amendments

F2 Words in s. 550(4) substituted (1.4.2009 retrospective) by Finance Act 2010 (c. 13), s. 45(2)(a)(3)

F3 S. 550(5A) inserted (retrospectively) by Finance Act 2010 (c. 13), s. 45(2)(b)(3)

551 Relief for borrower for finance charges in respect of the advance U.K.

(1) This section 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 Part 5 and this Part as a money debt which—

(a) is owed by the borrower or, if the borrower is a member of a firm which receives the advance, by the firm, 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 Part 5 and this Part 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 as a finance charge in respect of the advance in—

(a) the accounts of the borrower, or

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

is treated for the purposes of Part 5, this Part and Part 15 of ITA 2007 (deduction of income tax at source) as interest payable under that debt.

(5) That interest is 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—

(i) the subsequent buying of the securities or other securities by the borrower,

(ii) the receipt of the asset from the borrower, or

(iii) the discharge of the liability to the borrower,

as the case may be.