CFM17534 - Repos: FA 2007 rules for companies:
creditor quasi-repo definition
This guidance describes the corporation tax treatment of sale
and repurchase arrangements (“repos”) where the initial
sale of securities takes place on or after 1 October 2007
Definition of “creditor quasi-repo”
A company (“the lender”) has a creditor quasi-repo
if it does not have a debtor repo, and if
all of the following conditions are met:
- Condition A: under an arrangement another
person receives from the lender any money or other asset
(“the advance”).
- Condition B: in accordance with GAAP the
accounts of the lender record for the period in which the advance
is received a financial liability in respect of the advance.
- Condition C: ???under the arrangement or
another arrangement, a person sells securities to the lender or any
other person at any time.
- Condition D: that arrangement or other
arrangement
- entitles or obliges the lender subsequently to
sell the securities, or
- entitles or obliges a person other than the lender
subsequently to sell the securities, and makes “other
relevant provision.”
“Other relevant provision” means provision
- for the receipt from the lender of money,
securities or some other asset for the purpose of enabling the
other person to make the subsequent sale; or
- for the discharge of any liability to the lender
(whether by offset or otherwise) for the purpose of enabling the
other person to make the subsequent sale.
- Condition E: in accordance with GAAP, the
subsequent sale of the securities or the receipt from the lender of
the asset (or discharge of the liability to the lender) would
extinguish the financial asset in respect of the advance that has
been recorded in the accounts of the lender.
A company also has a creditor quasi-repo if it is a member of a
partnership that meets these conditions.
There are examples of creditor quasi-repos at
CFM17534a.
