CFM17255 - Repos: taxation: Section 737C ICTA88 and Chapter 4 Part 11 ITA07

This guidance describes the treatment of repos for income tax and capital gains tax purposes, and for corporation tax purposes where the original owner transfers the securities to the interim holder before 1 October 2007

Quantifying the deemed payment and adjusting the repurchase price

Section 737C applies whenever section 737A applies. It quantifies the deemed payment in section 737A (5), and provides for the actual repurchase price to be increased for tax purposes by the amount of that deemed payment. The section is in three parts: section 737C (2)-(3) deal with UK shares, section 737C (7)-(9) deal with UK debt securities and section 737C(10)-(11) deal with overseas securities.

The section provides that:

• the amount of the deemed payment is equal to the amount of the real payment of which that deemed payment is representative, and
• that the repurchase price is increased for the purposes of section 730A by the gross amount of the deemed payment.

S737C ICTA88 is re-written as ITA07/S602 (2) – S604.