|
| |
|
(3) | Condition B is that, in accordance with generally accepted accounting |
| |
practice, the accounts of the lender for the period in which the advance is |
| |
made record a financial asset in respect of the advance. |
| |
(4) | Condition C is that under the arrangement the borrower sells any securities |
| |
at any time to the lender. |
| 5 |
(5) | Condition D is that the arrangement makes provision conferring a right or |
| |
imposing an obligation on the lender to sell those or similar securities at any |
| |
| |
(6) | Condition E is that, in accordance with generally accepted accounting |
| |
practice, the subsequent sale of those or similar securities would extinguish |
| 10 |
the financial asset in respect of the advance recorded in the accounts of the |
| |
| |
(7) | For the purposes of conditions A to E references to the lender include a |
| |
partnership of which the lender is a member. |
| |
Meaning of creditor quasi-repo |
| 15 |
8 (1) | For the purposes of this Schedule a company (“the lender”) has a creditor |
| |
quasi-repo in any case if— |
| |
(a) | the lender does not have a creditor repo in that case, and |
| |
(b) | conditions A to E are met in that case. |
| |
(2) | Condition A is that under an arrangement another person receives from the |
| 20 |
lender any money or other asset (“the advance”). |
| |
(3) | Condition B is that, in accordance with generally accepted accounting |
| |
practice, the accounts of the lender for the period in which the advance is |
| |
made record a financial asset in respect of the advance. |
| |
(4) | Condition C is that under that or any other arrangement a person sells any |
| 25 |
securities at any time to the lender or any other person. |
| |
(5) | Condition D is that the arrangement or other arrangement— |
| |
(a) | makes provision conferring a right or imposing an obligation on the |
| |
lender to sell the securities or any other securities at any subsequent |
| |
| 30 |
(b) | makes provision conferring such a right or imposing such an |
| |
obligation on any other person and makes other relevant provision. |
| |
(6) | For this purpose any arrangement makes “other relevant provision” if it |
| |
| |
(a) | for the receipt of any money, securities or other asset from the lender |
| 35 |
under that arrangement for the purpose of enabling the other person |
| |
to make that subsequent sale, or |
| |
(b) | for the discharge of any liability to the lender under that |
| |
arrangement for that purpose (whether by way of set off or |
| |
| 40 |
(7) | Condition E is that, in accordance with generally accepted accounting |
| |
| |
(a) | the subsequent sale of the securities or the other securities by the |
| |
| |
|
| |
|
| |
|
(b) | the receipt of the asset from the lender, or the discharge of the |
| |
liability to the lender, under the arrangement or other arrangement, |
| |
| would extinguish the financial asset in respect of the advance recorded in |
| |
the accounts of the lender. |
| |
(8) | For the purposes of conditions A to E references to the lender include a |
| 5 |
partnership of which the lender is a member. |
| |
Ignoring effect on lender of sale of securities: creditor repos and creditor quasi-repos |
| |
9 (1) | This paragraph applies if a company (“the lender”) has a creditor repo or a |
| |
| |
(2) | For the purposes of the charge to corporation tax in respect of income of the |
| 10 |
lender arising while the arrangement is in force, the Corporation Tax Acts |
| |
| |
(a) | the lender did not hold the securities that are initially sold for any |
| |
period for which the arrangement is in force, and |
| |
(b) | the lender did not make in that period any payment representative |
| 15 |
of income payable in respect of those securities. |
| |
| |
(a) | an amount is not to be ignored for the purposes of that charge as a |
| |
result of sub-paragraph (2)(a) if it is, in accordance with generally |
| |
accepted accounting practice, recognised in determining the lender’s |
| 20 |
profit or loss for that period or taken into account in calculating the |
| |
amounts which are so recognised, and |
| |
(b) | a payment is not to be ignored for those purposes as a result of sub- |
| |
paragraph (2)(b) if the payment is, in accordance with that practice, |
| |
| 25 |
(4) | Nothing in sub-paragraph (3)(b) affects the question whether (apart from |
| |
that provision) the payment (or any part of it) may be deducted in |
| |
calculating any income for corporation tax purposes or against total profits. |
| |
Charge on lender for finance return in respect of the advance: creditor repos and creditor quasi- |
| |
| 30 |
10 (1) | This paragraph applies if a company (“the lender”) has a creditor repo or a |
| |
| |
(2) | The advance under the creditor repo or creditor quasi-repo is, in the case of |
| |
the lender, to be treated for the purposes of the loan relationship rules as a |
| |
| 35 |
(a) | is owed to the lender or, if the lender is a member of a partnership |
| |
which makes the advance, to the partnership, and |
| |
(b) | is owed by the person who initially sold the securities. |
| |
(3) | The arrangement is, in the case of the lender, to be treated for the purposes |
| |
of those rules as a transaction for the lending of money from which that debt |
| 40 |
is treated as arising for those purposes. |
| |
(4) | Any amount which, in accordance with generally accepted accounting |
| |
practice, is recorded in— |
| |
(a) | the accounts of the lender, or |
| |
|
| |
|
| |
|
(b) | if the lender is a member of a partnership which makes the advance, |
| |
the accounts of the partnership, |
| |
| as a finance return in respect of the advance is to be treated for those |
| |
purposes as interest receivable under that debt. |
| |
(5) | That interest is to be treated for those purposes as received at the earlier of— |
| 5 |
(a) | the time when the relevant repurchase takes place, and |
| |
(b) | the time when it becomes apparent that that repurchase will not take |
| |
| |
(6) | For this purpose “the relevant repurchase” means— |
| |
(a) | if the lender has a creditor repo, the subsequent sale of the securities |
| 10 |
or similar securities, and |
| |
(b) | if the lender has a creditor quasi-repo, the subsequent sale of the |
| |
securities or other securities by the lender, the receipt of the asset |
| |
from the lender or (as the case may be) the discharge of the liability |
| |
| 15 |
Ignoring purchase and subsequent sale for purposes of chargeable gains: creditor repos |
| |
11 (1) | This paragraph applies if— |
| |
(a) | a company (“the lender”) has a creditor repo, and |
| |
(b) | the lender (having bought the securities under the arrangement from |
| |
the borrower) is the only person with the right or obligation under |
| 20 |
the arrangement to sell those or similar securities at any subsequent |
| |
| |
(2) | The purchase of the securities, and the subsequent sale of those or similar |
| |
securities, by the lender under the arrangement are to be ignored for the |
| |
purposes of corporation tax in respect of chargeable gains (but see sub- |
| 25 |
| |
(3) | If at any time after the initial purchase of the securities— |
| |
(a) | it becomes apparent that the lender will not subsequently sell those |
| |
or similar securities under the arrangement, or |
| |
(b) | the accounting condition ceases to be met, |
| 30 |
| the lender is to be treated for the purposes of corporation tax in respect of |
| |
chargeable gains as acquiring the securities at that time for a consideration |
| |
equal to their market value at that time. |
| |
(4) | The accounting condition ceases to be met if, in accordance with generally |
| |
accepted accounting practice, the accounts of the lender for any period after |
| 35 |
the one in which the advance is made do not record a financial asset in |
| |
respect of the advance (except as a result of the subsequent sale of the |
| |
securities or similar securities). |
| |
(5) | If sub-paragraph (3) applies because the accounting condition ceases to be |
| |
met, any subsequent sale of those or similar securities by the lender under |
| 40 |
the arrangement is not to be ignored for the purposes of corporation tax in |
| |
respect of chargeable gains as a result of this paragraph. |
| |
(6) | For the purposes of this paragraph references to the lender include a |
| |
partnership of which the lender is a member. |
| |
|
| |
|
| |
|
Repo under arrangement designed to produce quasi-interest: anti-avoidance |
| |
12 (1) | This paragraph applies if— |
| |
(a) | under an arrangement a person receives any money or other asset |
| |
(“the advance”) from a company (or a partnership of which the |
| |
| 5 |
(b) | the company does not have a creditor repo or creditor quasi-repo by |
| |
reference to the arrangement but would have one on the applicable |
| |
accounting assumption (reading condition E in paragraphs 7 and 8 |
| |
in the light of that assumption), |
| |
(c) | the arrangement is designed to produce a return (“the quasi- |
| 10 |
interest”) to the company (or partnership of which it is a member) |
| |
which equates, in substance, to the return on an investment of money |
| |
| |
(d) | the main purpose, or one of the main purposes, of the arrangement |
| |
is the obtaining of a tax advantage. |
| 15 |
(2) | Paragraph 10 is to have effect as if— |
| |
(a) | the company had a creditor repo by reference to the arrangement, |
| |
| |
(b) | the quasi-interest were an amount recorded as mentioned in sub- |
| |
paragraph (4) of that paragraph. |
| 20 |
(3) | In this paragraph “the applicable accounting assumption” is the assumption |
| |
that, in accordance with generally accepted accounting practice, the |
| |
accounts of the company (or the partnership of which it is a member) for the |
| |
period in which the advance is made record a financial asset in respect of the |
| |
| 25 |
Requirements to deduct tax from manufactured payments: creditor repos and debtor repos |
| |
13 (1) | If a company has a creditor repo, Chapter 9 of Part 15 of ITA 2007 (deduction |
| |
of income tax at source: manufactured payments) has effect in relation to the |
| |
lender while the arrangement is in force as if— |
| |
(a) | the lender paid the borrower amounts which are representative of |
| 30 |
the income payable on the securities that are initially sold, |
| |
(b) | the payments were made under requirements of the arrangement, |
| |
| |
(c) | the payments were made on the dates on which the income is |
| |
| 35 |
(2) | If a company has a debtor repo, the reverse charge provisions of Chapter 9 |
| |
of Part 15 of ITA 2007 have effect in relation to the borrower while the |
| |
arrangement is in force as if— |
| |
(a) | the lender paid the borrower amounts which are representative of |
| |
the income payable on the securities that are initially sold, |
| 40 |
(b) | the payments were made under requirements of the arrangements, |
| |
| |
(c) | the payments were made on the dates on which the income is |
| |
| |
(3) | If sub-paragraph (1) or (2) applies, any payment actually made under an |
| 45 |
arrangement which is representative of any income payable on any |
| |
|
| |
|
| |
|
securities is to be treated for the purposes of Chapter 9 of Part 15 of ITA 2007 |
| |
as if it had not been made. |
| |
(4) | In this paragraph “the reverse charge provisions of Chapter 9 of Part 15 of |
| |
| |
(a) | regulations under section 918(4) of ITA 2007 (manufactured |
| 5 |
dividends on UK shares (Real Estate Investment Trusts): the reverse |
| |
| |
(b) | section 920 of that Act (foreign payers of manufactured interest: the |
| |
| |
(c) | section 923 of that Act (foreign payers of manufactured overseas |
| 10 |
dividends: the reverse charge). |
| |
| |
| |
“arrangement” includes any agreement or understanding (whether or |
| |
not legally enforceable), |
| 15 |
“creditor quasi-repo” has the meaning given by paragraph 8, |
| |
“creditor repo” has the meaning given by paragraph 7, |
| |
“debtor quasi-repo” has the meaning given by paragraph 3, |
| |
“debtor repo” has the meaning given by paragraph 2, |
| |
“discharge”, in relation to a liability, means the discharge of the liability |
| 20 |
in whole or in part (and “discharged” is to be read accordingly), |
| |
“the loan relationship rules” means the provisions of Chapter 2 of Part |
| |
| |
“market value” has the same meaning as in TCGA 1992, |
| |
“overseas dividend”, in relation to overseas securities, means any |
| 25 |
interest, dividend or other annual payment payable in respect of the |
| |
| |
“overseas securities” means shares, stock or other securities issued by— |
| |
(a) | a government or public or local authority of a territory |
| |
outside the United Kingdom, or |
| 30 |
(b) | any other body of persons not resident in the United |
| |
| |
“securities” (except in the definition of “overseas securities”) means |
| |
shares, stock or other securities issued by— |
| |
(a) | the government of the United Kingdom, |
| 35 |
(b) | any public or local authority in the United Kingdom, or |
| |
(c) | any company or other body resident in the United Kingdom, |
| |
or overseas securities, and |
| |
“tax advantage” has the meaning given by section 840ZA of ICTA. |
| |
(2) | For the purposes of this Schedule references to a person’s receiving any asset |
| 40 |
include the person’s obtaining directly or indirectly the value of any asset or |
| |
otherwise deriving directly or indirectly any benefit from it. |
| |
(3) | For the purposes of this Schedule— |
| |
(a) | in any case where a person buys securities (or has a right or |
| |
obligation to buy securities) but the securities are (or are to be) held |
| 45 |
for another person’s benefit, that other person is treated as buying |
| |
(or having the right or obligation to buy) the securities, and |
| |
|
| |
|
| |
|
(b) | in any case where a person sells securities but the proceeds of the sale |
| |
are held for another person’s benefit, that other person is treated as |
| |
| |
(4) | For the purposes of this Schedule securities are similar if they entitle their |
| |
| 5 |
(a) | the same rights against the same persons as to capital, interest and |
| |
| |
(b) | the same remedies for the enforcement of those rights, |
| |
| in spite of any difference in the total nominal amounts of the respective |
| |
securities or in the form in which they are held or the manner in which they |
| 10 |
| |
(5) | For the purposes of this Schedule it does not matter whether or not provision |
| |
of any arrangement conferring a right or imposing an obligation on any |
| |
person to buy any securities is subject to any conditions. |
| |
(6) | For the purposes of this Schedule an arrangement is in force from the time |
| 15 |
when the securities are initially sold until the earlier of— |
| |
(a) | the time when the relevant repurchase takes place, and |
| |
(b) | the time when it becomes apparent that that repurchase will not take |
| |
| |
(7) | For this purpose “the relevant repurchase” means— |
| 20 |
(a) | in the case of a debtor repo, the subsequent buying of the securities |
| |
| |
(b) | in the case of a debtor quasi-repo, the subsequent buying of the |
| |
securities or other securities by the borrower, the receipt of the asset |
| |
from the borrower or (as the case may be) the discharge of the |
| 25 |
liability to the borrower, |
| |
(c) | in the case of a creditor repo, the subsequent sale of the securities or |
| |
| |
(d) | in the case of a creditor quasi-repo, the subsequent sale of the |
| |
securities or other securities by the lender, the receipt of the asset |
| 30 |
from the lender or (as the case may be) the discharge of the liability |
| |
| |
(8) | Any reference in this Schedule to an amount being recognised in |
| |
determining a company’s profit or loss for a period is to an amount being |
| |
recognised for accounting purposes— |
| 35 |
(a) | in the company’s profit and loss account or income statement, |
| |
(b) | in the company’s statement of recognised gains and losses or |
| |
statement of changes in equity, or |
| |
(c) | in any other statement of items brought into account in calculating |
| |
the company’s profits and losses for that period. |
| 40 |
(9) | In determining for the purposes of this Schedule whether an amount is |
| |
recorded as a financial asset or liability in respect of the advance it is to be |
| |
assumed that the period of account in which the advance is received or made |
| |
ended immediately after the receipt or making of the advance. |
| |
(10) | For the purposes of paragraphs 6(4) and 11(4)— |
| 45 |
(a) | any period of account in which the advance is received or made is |
| |
treated as if it ended immediately after the receipt or making of the |
| |
| |
|
| |
|
| |
|
(b) | a new period of account is treated as beginning immediately after the |
| |
| |
(11) | If any person does not draw up accounts in accordance with generally |
| |
accepted accounting practice, this Schedule applies as if the accounts had |
| |
been drawn up by the person in accordance with that practice. |
| 5 |
| |
15 (1) | The Treasury may by regulations provide for all or any of the provisions of |
| |
this Schedule to apply with modifications in relation to either or both of the |
| |
| |
(a) | non-standard repo cases (see sub-paragraphs (2) to (5)), and |
| 10 |
(b) | cases involving redemption arrangements (see sub-paragraph (6)). |
| |
(2) | A case is a non-standard repo case if— |
| |
(a) | a company has a repo, |
| |
(b) | there has been a sale of the securities under the arrangement or |
| |
arrangements by reference to which the company has the repo, and |
| 15 |
(c) | any of conditions A to C are met in relation to the repo. |
| |
(3) | Condition A is that those securities, or similar or other securities, are not |
| |
subsequently bought under the arrangement or arrangements. |
| |
(4) | Condition B is that provision is made by or under an arrangement for |
| |
different or additional securities to be treated as, or as included with, |
| 20 |
securities which, for the purposes of the subsequent purchase, are to |
| |
represent those initially sold. |
| |
(5) | Condition C is that provision is made by or under an arrangement for |
| |
securities to be treated as not so included. |
| |
(6) | A case involves redemption arrangements if— |
| 25 |
(a) | arrangements, corresponding to those made in cases where a |
| |
company has a repo, are made in relation to securities that are to be |
| |
redeemed in the period after their sale, and |
| |
(b) | the arrangements are such that a person (instead of having the right |
| |
or obligation to buy those securities, or similar or other securities, at |
| 30 |
any subsequent time) has a right or obligation in respect of the |
| |
benefits that will result from the redemption. |
| |
| |
(a) | make different provision for different cases, and |
| |
(b) | contain incidental, supplemental, consequential and transitional |
| 35 |
| |
(8) | Regulations about paragraph 6 or 11 may, in particular, include |
| |
modifications of TCGA 1992 in relation to cases where, as a result of the |
| |
regulations, any acquisition or disposal is excluded from those which are to |
| |
be ignored for the purposes of corporation tax in respect of chargeable gains. |
| 40 |
| |
“modifications” include exceptions and omissions, and |
| |
| |
(a) | a debtor repo or debtor quasi-repo, or |
| |
|
| |
|