(
CFM17530a explains why A has a debtor
repo in this case.)
Transaction
As in
CFM17530a/
CFM17550a:
In addition:
| C’s accounting entries, in accordance with
GAAP
In addition to the entries at CFM17530a: |
|
| 31/5/09 (real dividend/ interest paid to C) | Dr Cash 10; Cr Financial Asset 10 |
| 31/5/09 (manufactured payment made to A) | Dr Financial Asset 10; Cr Cash 10 |
| 1/1/09-30/6/09 (repo “interest”
accrual):
| Dr Financial Asset 3; Cr P&L 3 (the financial asset which has increased to 103 is reduced to nil by receipt of the repurchase price on 30/6/09) |
| Net Profit and Loss result: | Credit 3: “interest” |
Tax Treatment of C
As in the example at
CFM17550a, C’s finance return of
3 is treated as interest for loan relationships purposes (
CFM17544). C’s receipt of the real
income and making of the manufactured payment are both disregarded
for CT purposes (
CFM17536). Deduction of tax: C is deemed
to make a manufactured payment to A and, depending on the nature of
the security and the status of the borrower, may be required to
deduct tax (the manufactured payment itself is ignored for tax
deduction purposes). See
CFM17552.
Further points to note
