Corporation Tax Act 2009 section 546

Charge on lender for finance return in respect of the advance

Section 546 explains how the lender in a repo or quasi-repo arrangement is taxed on the finance return it earns from the transaction, by treating the arrangement as a loan relationship with deemed interest.

• Where a company acts as the lender in a creditor repo or creditor quasi-repo, the advance it makes is treated as a money debt owed to the lender (or to the firm, if the lender is a member of a firm that made the advance) by the party that initially sold the securities.
• The entire arrangement is treated as a money-lending transaction, bringing it within the loan relationships rules of Parts 5 and 6 of the Act.
• Any amount recorded in the lender's (or firm's) accounts as a finance return on the advance, in accordance with generally accepted accounting practice, is treated as interest receivable on that deemed loan.
• The deemed interest is treated as received at whichever is earlier: the time the relevant repurchase takes place, or the time it becomes apparent that the repurchase will not take place.