What did sections 114–118 of Schedule 2 to the Income Tax Act 2007 cover?

Sections 114–118 set out rules for deemed manufactured payments arising from sale and repurchase agreements (repos). They ensured that income paid on securities during a repo period, such as dividends or interest, was taxed in the hands of the original economic owner for United Kingdom income tax purposes.

Why were sections 114–118 of the Income Tax Act 2007 repealed?

These sections were repealed by the Finance Act 2013, Schedule 12, paragraph 15(4). The repeal removed the specific income tax rules treating certain repo payments as manufactured payments. The Finance Act 2013 introduced a revised and updated framework for the taxation of repos and stock lending arrangements.

What legislation now governs the tax treatment of repo transactions in the United Kingdom?

Following the repeal of sections 114–118, repo transactions are now governed by the replacement provisions introduced by the Finance Act 2013. Advisers and accountants should refer to the current legislation as amended by that Act rather than relying on the now-defunct deemed manufactured payment rules.

How did deemed manufactured payments work under the old repo rules?

Under the old rules, if securities were sold under a repo and income such as interest was paid during the repo period, a deemed manufactured payment arose. This ensured the income was taxed in the original holder's hands as the economic owner, reflecting the true commercial substance of the arrangement.

Income Tax Act 2007 sections 114–118

Deemed manufactured payments: repos

Sections 114–118 previously dealt with the treatment of deemed manufactured payments in the context of sale and repurchase arrangements (repos), but these provisions have been repealed.

Sections 114–118 of Schedule 2 to the Income Tax Act 2007 originally addressed deemed manufactured payments arising from repo transactions.
These sections were repealed by the Finance Act 2013, Schedule 12, paragraph 15(4).
The repeal removed the specific income tax rules that treated certain payments under repo arrangements as if they were manufactured payments.
Any current tax treatment of repo transactions should be considered under the replacement provisions introduced by the Finance Act 2013.

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