|
| |
|
545 | Ignoring effect on lender etc of sale of securities |
| |
(1) | This section applies if a company (“the lender”) has a creditor repo or a creditor |
| |
| |
(2) | For the purposes of the charge to corporation tax in respect of income of the |
| |
lender arising while the arrangement is in force, the Corporation Tax Acts have |
| 5 |
| |
(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 of |
| |
income payable in respect of the securities. |
| 10 |
(3) | But subsection (2) is subject to subsections (4) and (5). |
| |
(4) | An amount is not to be ignored for the purposes of that charge as a result of |
| |
| |
(a) | it is, in accordance with generally accepted accounting practice, |
| |
recognised in determining the lender’s profit or loss for that or any |
| 15 |
| |
(b) | it is taken into account in calculating the amounts which are so |
| |
| |
(5) | A payment is not to be ignored for the purposes of that charge as a result of |
| |
subsection (2)(b) if it is, in accordance with that practice, so recognised. |
| 20 |
(6) | Nothing in subsection (5) affects the question whether (apart from that |
| |
provision) the payment (or any part of it) may be deducted in calculating |
| |
income for corporation tax purposes or against total profits. |
| |
546 | Charge on lender for finance return in respect of the advance |
| |
(1) | This section applies if a company (“the lender”) has a creditor repo or creditor |
| 25 |
| |
(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 Part 5 and this Part as a money debt |
| |
| |
(a) | is owed to the lender or, if the lender is a member of a firm which makes |
| 30 |
the advance, to the firm, 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 is |
| |
treated as arising for those purposes. |
| 35 |
(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 firm which makes the advance, the |
| |
| 40 |
| as a finance return in respect of the advance is treated for those purposes as |
| |
interest receivable under that debt. |
| |
(5) | That interest is treated for those purposes as received at 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 |
| |
| |
(6) | For this purpose “the relevant repurchase” means— |
| |
(a) | if the lender has a creditor repo, the subsequent sale of the securities or |
| |
| 5 |
(b) | if the lender has a creditor quasi repo— |
| |
(i) | the subsequent sale of the securities or other securities by the |
| |
| |
(ii) | the receipt of the asset from the lender, or |
| |
(iii) | the discharge of the liability to the lender, |
| 10 |
| |
547 | Repo under arrangement designed to produce quasi-interest: tax avoidance |
| |
(1) | This section applies if— |
| |
(a) | under an arrangement a person receives any money or other asset (“the |
| |
advance”) from a company or a firm of which the company is a |
| 15 |
| |
(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 sections 543 and 544 in |
| |
the light of that assumption), |
| 20 |
(c) | the arrangement is designed to produce a return (“the quasi-interest”) |
| |
to the company or firm which equates, in substance, to the return on an |
| |
investment of money at interest, and |
| |
(d) | the main purpose, or one of the main purposes, of the arrangement is |
| |
the obtaining of a tax advantage. |
| 25 |
(2) | Section 546 applies as if— |
| |
(a) | the company had a creditor repo by reference to the arrangement, and |
| |
(b) | the quasi-interest were an amount recorded as mentioned in section |
| |
| |
(3) | In this section “the applicable accounting assumption” is the assumption that, |
| 30 |
in accordance with generally accepted accounting practice, the accounts of the |
| |
company (or the firm of which it is a member) for the period in which the |
| |
advance is made record a financial asset in respect of the advance. |
| |
Debtor repos and debtor quasi-repos |
| |
548 | Meaning of debtor repo |
| 35 |
(1) | For the purposes of this Chapter a company (“the borrower”) has a debtor repo |
| |
if each of conditions A to E is met. |
| |
(2) | Condition A is that under an arrangement the borrower receives from another |
| |
person (“the lender”) any money or other asset (“the advance”). |
| |
(3) | Condition B is that, in accordance with generally accepted accounting practice, |
| 40 |
the accounts of the borrower for the period in which the advance is received |
| |
record a financial liability in respect of the advance. |
| |
|
| |
|
| |
|
(4) | Condition C is that under the arrangement the borrower sells any securities at |
| |
| |
(5) | Condition D is that the arrangement makes provision conferring a right or |
| |
imposing an obligation on the borrower to buy those or similar securities at |
| |
| 5 |
(6) | Condition E is that, in accordance with generally accepted accounting practice, |
| |
the subsequent buying of those or similar securities would extinguish the |
| |
financial liability in respect of the advance recorded in the accounts of the |
| |
| |
(7) | For the purposes of conditions A to E references to the borrower include a firm |
| 10 |
of which the borrower is a member. |
| |
549 | Meaning of debtor quasi-repo |
| |
(1) | For the purposes of this Chapter a company (“the borrower”) has a debtor |
| |
quasi-repo in any case if— |
| |
(a) | the borrower does not have a debtor repo, and |
| 15 |
(b) | each of conditions A to E is met. |
| |
(2) | Condition A is that under an arrangement the borrower receives any money or |
| |
other asset (“the advance”). |
| |
(3) | Condition B is that, in accordance with generally accepted accounting practice, |
| |
the accounts of the borrower for the period in which the advance is received |
| 20 |
record a financial liability in respect of the advance. |
| |
(4) | Condition C is that under that or any other arrangement the borrower sells any |
| |
| |
(5) | Condition D is that the arrangement or other arrangement— |
| |
(a) | makes provision conferring a right or imposing an obligation on the |
| 25 |
borrower to buy the securities or any other securities at any subsequent |
| |
| |
(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 makes |
| 30 |
| |
(a) | for the receipt of any money or other asset from the borrower under |
| |
that arrangement for the purpose of enabling the other person to make |
| |
that subsequent purchase, or |
| |
(b) | for the discharge of any liability to the borrower under that |
| 35 |
arrangement for that purpose (whether by way of set off or otherwise). |
| |
(7) | Condition E is that, in accordance with generally accepted accounting |
| |
| |
(a) | the subsequent buying of the securities or the other securities by the |
| |
| 40 |
(b) | the receipt of the asset from the borrower, or the discharge of the |
| |
liability to the borrower, under the arrangement or other arrangement, |
| |
| would extinguish the financial liability in respect of the advance recorded in |
| |
the accounts of the borrower. |
| |
|
| |
|
| |
|
(8) | For the purposes of conditions A to E references to the borrower include a firm |
| |
of which the borrower is a member. |
| |
550 | Ignoring effect on borrower of sale of securities |
| |
(1) | This section applies if a company (“the borrower”)— |
| |
(a) | has a debtor repo or a debtor quasi-repo, or |
| 5 |
(b) | has a liability which is discharged under a relevant arrangement. |
| |
(2) | A relevant arrangement is one— |
| |
(a) | in relation to which conditions C and D in section 549 are met, and |
| |
(b) | the main purpose or one of the main purposes of which is the obtaining |
| |
| 10 |
(3) | For the purposes of the charge to corporation tax in respect of income of the |
| |
borrower arising while the arrangement is in force, the Corporation Tax Acts |
| |
| |
(a) | the borrower held the securities which are initially sold for any period |
| |
for which the arrangement is in force, and |
| 15 |
(b) | the borrower did not receive in that period amounts representative of |
| |
income payable in respect of the securities. |
| |
(4) | Subsection (3) is subject to subsections (5) and (6). |
| |
(5) | No amount is to be charged to corporation tax as a result of subsection (3)(a) |
| |
| 20 |
(a) | it is, in accordance with generally accepted accounting practice, |
| |
recognised in determining the borrower’s profit or loss for that or any |
| |
| |
(b) | it is taken into account in calculating the amounts which are so |
| |
| 25 |
(6) | If the securities which are initially sold are overseas securities, the entitlement |
| |
of the borrower to double taxation relief in respect of any overseas dividend |
| |
payable in respect of those securities is determined as if— |
| |
(a) | subsection (3) were omitted, |
| |
(b) | the borrower received a payment of an amount which is representative |
| 30 |
| |
(c) | the payment were made under a requirement of the arrangement, and |
| |
(d) | the payment were made on the date on which that dividend is payable. |
| |
(7) | For the purposes of this section “double taxation relief” means any relief given |
| |
under or as a result of Part 18 of ICTA. |
| 35 |
551 | Relief for borrower for finance charges in respect of the advance |
| |
(1) | This section applies if a company (“the borrower”) has a debtor repo or a |
| |
| |
(2) | The advance under the debtor repo or debtor quasi-repo is, in the case of the |
| |
borrower, to be treated for the purposes of Part 5 and this Part as a money debt |
| 40 |
| |
(a) | is owed by the borrower or, if the borrower is a member of a firm which |
| |
receives the advance, by the firm, and |
| |
(b) | is owed to the person to whom the securities are initially sold. |
| |
|
| |
|
| |
|
(3) | The arrangement is, in the case of the borrower, to be treated for the purposes |
| |
of Part 5 and this Part as a transaction for the lending of money from which that |
| |
debt is treated as arising for those purposes. |
| |
(4) | Any amount which, in accordance with generally accepted accounting |
| |
practice, is recorded as a finance charge in respect of the advance in— |
| 5 |
(a) | the accounts of the borrower, or |
| |
(b) | if the borrower is a member of a firm which receives the advance, the |
| |
| |
| is treated for the purposes of Part 5, this Part and Part 15 of ITA 2007 |
| |
(deduction of income tax at source) as interest payable under that debt. |
| 10 |
(5) | That interest is treated for those purposes as paid at 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 |
| |
| |
(6) | For this purpose “the relevant repurchase” means— |
| 15 |
(a) | if the borrower has a debtor repo, the subsequent buying of the |
| |
securities or similar securities, and |
| |
(b) | if the borrower has a debtor quasi-repo— |
| |
(i) | the subsequent buying of the securities or other securities by the |
| |
| 20 |
(ii) | the receipt of the asset from the borrower, or |
| |
(iii) | the discharge of the liability to the borrower, |
| |
| |
| |
552 | General provisions about arrangements |
| 25 |
(1) | For the purposes of this Chapter 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. |
| |
(2) | For the purposes of this Chapter an arrangement is in force from the time when |
| |
the securities are initially sold until the earlier of— |
| 30 |
(a) | the time when the relevant repurchase takes place, and |
| |
(b) | the time when it becomes apparent that that repurchase will not take |
| |
| |
(3) | In subsection (2) “the relevant repurchase” has the meaning given by |
| |
| 35 |
(4) | In the case of a creditor repo, it means the subsequent sale of the securities or |
| |
| |
(5) | In the case of a creditor quasi-repo, it means— |
| |
(a) | the subsequent sale of the securities or other securities by the lender, |
| |
(b) | the receipt of the asset from the lender, or |
| 40 |
(c) | the discharge of the liability to the lender, |
| |
| |
|
| |
|
| |
|
(6) | In the case of a debtor repo, it means the subsequent buying of the securities or |
| |
| |
(7) | In the case of a debtor quasi-repo, it means— |
| |
(a) | the subsequent buying of the securities or other securities by the |
| |
| 5 |
(b) | the receipt of the asset from the borrower, or |
| |
(c) | the discharge of the liability to the borrower, |
| |
| |
553 | Persons buying or selling for others |
| |
(1) | For the purposes of this Chapter, in any case where— |
| 10 |
(a) | a person (“A”) buys securities (or has a right or obligation to buy |
| |
| |
(b) | the securities are (or are to be) held for the benefit of another person |
| |
| |
| B (not A) is treated as buying (or having the right or obligation to buy) the |
| 15 |
| |
| |
(a) | a person (“C”) sells securities, but |
| |
(b) | the proceeds of the sale are held for the benefit of another person (“D”), |
| |
| D (not C) is treated as selling the securities. |
| 20 |
554 | Power to modify this Chapter |
| |
(1) | The Treasury may by regulations provide for all or any of the provisions of this |
| |
Chapter to apply with modifications in relation to— |
| |
(a) | cases where section 555 (non-standard repo cases) applies, or |
| |
(b) | cases involving redemption arrangements, or |
| 25 |
| |
(2) | A case involves redemption arrangements if— |
| |
(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 |
| 30 |
(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 any |
| |
subsequent time) has a right or obligation in respect of the benefits |
| |
which will result from the redemption. |
| |
(3) | The regulations may make— |
| 35 |
(a) | different provision for different cases, and |
| |
(b) | incidental, supplemental, consequential and transitional provision and |
| |
| |
(4) | In this section and section 555— |
| |
“modifications” include exceptions and omissions, and |
| 40 |
| |
(a) | a debtor repo or debtor quasi-repo, or |
| |
|
| |
|
| |
|
(b) | a creditor repo or creditor quasi-repo (including anything |
| |
treated, as a result of section 547, as a creditor repo for the |
| |
purposes of section 546). |
| |
555 | Cases where section 554 applies: non-standard repos |
| |
(1) | The cases to which this section applies are where— |
| 5 |
(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 |
| |
(c) | any of conditions A to C is met in relation to the repo. |
| |
(2) | Condition A is that those securities, or similar or other securities, are not |
| 10 |
subsequently bought under the arrangement or arrangements. |
| |
(3) | 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, securities which, |
| |
for the purposes of the subsequent purchase, are to represent those initially |
| |
| 15 |
(4) | Condition C is that provision is made by or under an arrangement for |
| |
securities to be treated as not so included. |
| |
| |
556 | Meaning of securities and similar securities |
| |
(1) | In this Chapter “securities” (except in the definition of “overseas securities” in |
| 20 |
| |
(a) | shares, stock or other securities issued by— |
| |
(i) | the government of the United Kingdom, |
| |
(ii) | any public or local authority in the United Kingdom, or |
| |
(iii) | any UK resident company or other UK resident body, or |
| 25 |
| |
(2) | For the purposes of this Chapter securities are similar if they entitle their |
| |
| |
(a) | the same rights against the same persons as to capital, interest and |
| |
| 30 |
(b) | the same remedies for the enforcement of those rights. |
| |
(3) | For the purposes of subsection (2) any difference in— |
| |
(a) | the total nominal amounts of the respective securities, |
| |
(b) | the form in which they are held, or |
| |
(c) | the way in which they can be transferred, |
| 35 |
| |
557 | Meaning of person receiving an asset |
| |
For the purposes of this Chapter references to a person receiving any asset |
| |
| |
(a) | obtaining the value of any asset directly or indirectly, or |
| 40 |
(b) | otherwise deriving any benefit from it directly or indirectly. |
| |
|
| |
|