CFM17210a - Repos: taxation: text of section
730A ICTA88
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
Section 730A
Section 730A applies wherever one person sells securities to
another and undertakes under the same or a related agreement to
repurchase them at a future date. The rule also applies where the
repurchase mechanism is the exercise of an option or where the
repurchaser is a person connected with the vendor. The relevant
text is below:
730A.-Treatment of price differential on sale and
repurchase of securities.
(1) Subject to subsection (8) below, this section applies
where-
- a person ("the original owner") has transferred any securities
to another person ("the interim holder") under an agreement to sell
them;
- the original owner or a person connected with him is required
to buy them back either-
(i) in pursuance of an obligation to do so imposed by that
agreement or by any related agreement, or
(ii) in consequence of the exercise of an option acquired
under that agreement or any related agreement; and
- the sale price and the repurchase price are different.
(8) Except where regulations under section 737E otherwise
provide, this section does not apply if-
- the agreement or agreements under which provision is made for
the sale and repurchase are not such as would be entered into by
persons dealing with each other at arm's length; or
- all of the benefits or risks arising from fluctuations, before
the repurchase takes place, in the market value of the securities
sold accrue to, or fall on, the interim holder.
