CFM46300 - 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.
- 1January 2009: A (borrower) sells securities to C (lender) for 100.
- 30 June 2009: 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 January 2009 to 30 June 2009
- 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 June 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).