Corporation Tax Act 2009 section 543

Meaning of creditor repo

Section 543 defines what constitutes a "creditor repo" — a repurchase arrangement viewed from the perspective of the lending company that purchases securities as collateral for what is, in substance, a loan.

• A creditor repo arises where a company (the lender) provides money or other assets (the advance) to another person (the borrower) under an arrangement, and the lender's accounts record a financial asset in respect of that advance under generally accepted accounting practice.
• Under the same arrangement, the borrower sells securities to the lender, and the arrangement includes a right or obligation for the lender to sell those or similar securities back at a later date.
• The subsequent sale of those or similar securities must, under generally accepted accounting practice, have the effect of extinguishing the financial asset recorded in the lender's accounts in respect of the original advance.
• References to the lender throughout these conditions include any firm of which the lender is a member, so partnership arrangements are also covered.