Corporation Tax Act 2009 section 551

Relief for borrower for finance charges in respect of the advance

Section 551 provides relief to the borrower in a repo or quasi-repo arrangement by allowing finance charges recorded in its accounts to be treated as deductible interest for corporation tax purposes.

• The advance received by the borrower under a debtor repo or debtor quasi-repo is treated as a money debt owed by the borrower (or the firm, if the borrower is a member of a firm receiving the advance) to the initial buyer of the securities.
• The arrangement is treated as a money-lending transaction, and any finance charge recorded in the borrower's (or firm's) accounts in respect of the advance is treated as interest payable on that debt.
• The interest is treated as paid at the earlier of the time the relevant repurchase takes place or the time it becomes apparent that the repurchase will not take place.
• The relevant repurchase means the buying back of the securities (or similar securities) for a repo, or for a quasi-repo it means the buying of securities, receipt of an asset, or discharge of a liability, as the case may be.