CFM17270 - Repos: taxation: outline of paragraph 15

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

Introduction to the provisions in paragraph 15

FA96/SCH9/PARA15 applies equally to repos and stock lending. Both types of transaction come within the definition given in Para 15(3) of 'an agreement or series of agreements' through which

• the rights under a loan relationship are transferred from one person to another, and
• the same or equivalent rights, or the redemption proceeds, are then transferred back to the original holder (or a person connected with the holder).

Equivalent rights

Para 15(4) defines equivalent rights as those giving the same rights as the originals. So, for example

• A transfers government stock to B
• B sells the stock to C
• B buys from D further stock from the same issue
• B returns this stock to A.

Para 15(4) also covers situations where there are changes to the loan relationship, for example stock with a nominal value of £1 subdivided into 50p units.