CFM17265 - Repos: taxation: transfers disregarded under loan relationships rules
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
Disregarding transfers under loan relationship rules
Disposals and acquisitions of loan relationships, including
transfers, usually come under the definition of 'related
transaction' in FA96/S84 see
CFM5065. However, FA96/SCH9/PARA15 (1)
determines that the disposal and acquisition of an asset
representing a loan relationship in pursuance of a repo or stock
loan (
CFM17055) are not related transactions.
Thus no debit or credit normally falls to be brought into account
in relation to the disposal and reacquisition in pursuance of the
repo.
This means that
- any debits and credits arising on the transfer or retransfer of a security are ignored (Para 15(1)), and
- any debits or credits accruing, such as discount or exchange losses, will continue to be brought into account by the original holder/stock lender (Para 15(4A)).
However, the
- discharge, or
- redemption
of the security is treated as a related transaction, and any
debits or credits are taxable.
Paragraph 15 does not apply to any disposal or acquisition of
the securities made by the interim holder during the period of the
repo.
In relation to transactions entered into on or after 9 April
2003, FA96/SCH 9/PARA15 will not apply in any case where
ICTA88S730A is prevented from applying by Section 730A (8), see
CFM17225. This ensures for instance that
the increased repurchase price brought about by section 737C can be
brought into account even where section 730A does not apply.
