CFM17260 - Repos: taxation: other effects of section 737C ICTA88 and sections 602-604 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

Application of the repurchase price adjustment to other legislation

The normal rule is that the adjustment to the repurchase price provided by section 737C (ITA07/S602 (2) – S604) applies only for the purposes of Section 730A (ITA07/S607). However, where section 730A (ITA07/S607) does not itself apply because of section 730A (8) (ITA07/S608) see CFM17225, then section 737C (11A) (ITA07/S605) provides the increased repurchase price has effect for all other purposes of the Tax Acts. This ensures that in cases where section 737A ICTA88 or ITA07/S602 applies, a tax charge should arise, based on a deemed profit on resale, even where section 730A (ITA07/S607) does not apply.

Finally, for completeness, where the adjustment under section 737C (ITA07/S602(2) – S604) would mean that there is no difference between the sale price and the (adjusted) repurchase price (so that there would be no price differential for section 730A or ITA07/S607 to bring into account), then the adjustment under section 737C or ITA07/S602 (2) – S604 applies for all purposes of the Taxes Acts and, where TCGA92/s263A ( CFM17280) does not apply, for Capital Gains Tax purposes as well.