Corporation Tax Act 2009 section 542

Introduction to Chapter

Section 542 introduces the Chapter dealing with "repos" — arrangements where securities are sold and repurchased in a way that is, in substance, equivalent to a secured loan, and explains how the Chapter is structured.

• A repo arrangement involves the sale of securities followed by the repurchase of the same or similar securities, where the economic substance is equivalent to a loan secured against those securities.
• The purpose of the Chapter is to ensure that such arrangements are taxed in line with their true economic substance — that is, as lending transactions — rather than as straightforward sales and purchases of securities.
• Sections 543 to 546 set out the rules for "creditor repos" and "creditor quasi-repos," which are arrangements where the company is in the position of the lender.
• Sections 548 to 551 set out the rules for "debtor repos" and "debtor quasi-repos," which are arrangements where the company is in the position of the borrower.