Finance Bill Tracking Service 2007 | Budget 2007 | Budget Notes

BN15 Sale and repurchase agreements ("REPOS")

Who is likely to be affected?

1   Large companies within the financial sector and other large companies that use sale and repurchase agreements ("repos") as a means of financing.

General description of the measure

2   Legislation will be introduced in Finance Bill 2007 to establish a new corporation tax regime for repos to replace and simplify the existing rules.

Operative date

3   The legislation will not come into force until the current round of consultation with businesses and representative bodies involved in this specialised area of taxation is completed. The legislation will apply in relation to repos entered into on or after an appointed day. This will allow maximum time to consult to ensure that the introduction of the legislation does not have unforeseen consequences.

Current law and proposed revisions

4   The current legislation in section 730A and section 737C of Income and Corporation Taxes Act 1988 is intended to tax repos in accordance with their economic and accounting substance as financing transactions, but has been exploited in recent years in a number of arrangements involving tax avoidance.

5   The new rules will introduce a simpler accounts-based regime where profits and losses made by companies from their repo transactions will be taken directly from entries in accounts prepared under generally accepted accounting practice. This is subject to any adjustment that would ordinarily be required under the rules for taxing corporate debt (the loan relationship rules in Chapter 2 of Part 4 Finance Act 1996).

Further advice

6   If you have any questions about this change, please contact Richard Rogers on 020 7147 2625 (email: or Richard Thomas on 020 7147 2558 (email: Information about Budget measures is available on the HM Revenue & Customs website at