Securities that are the subject of the repo may be redeemed
during the life of the repo, so that it is the proceeds of
redemption that are returned, not the securities themselves.
Section 737A or as the case may be ITA07/S602 also apply in these
circumstances, provided the normal conditions are satisfied, see
SI1995/3220.
It is quite common for repo agreements to enable the
securities originally sold under the repo to be replaced with other
securities of comparable credit risk quality and equal value. For
the purposes of section 737A or Chapter 4, Part 11 of ITA07
references to securities are to be taken to include references to
securities which have been substituted for those originally sold.
If any deemed manufactured payment arises under section 737A or
ITA07/S602 it will relate to the kind of securities in respect of
which it is paid - in particular so that if tax has to be deducted
from it the appropriate rate of tax is used.
