Deemed loan relationships: repos: tax rules: creditor and creditor quasi-repos: further examples: no income
Example: creditor repo: no income arises on securities during term of repo
CFM46230 explains why C has a creditor repo in this case.
- 1/1/09: A (borrower) sells securities to C (lender) for 100.
- 30/6/09: A repurchases the same or similar securities from C for 103. This includes a finance return of 3 (6 months at 6% per annum).
|C’s accounting entries, in accordance with GAAP in addition to the entries at CFM46230:|
|1/1/09-30/6/09 (repo ‘interest’ accrual):||Dr Financial Asset 3|
Cr P&L 3
|(the financial asset which has increased to 103 is reduced to nil by receipt of the repurchase price on 30/6/09)|
|Net Profit and Loss result:||Cr 3: ‘interest’|
Tax Treatment of C
C’s finance return of 3 is treated as interest for loan relationships purposes (CFM46270).