What does 'buying back' securities mean under section 570 of the Income Tax Act 2007?

Under section 570, a person 'buys back' securities if they reacquire the same securities they previously sold or transferred, or acquire similar securities of the same kind. The definition is deliberately broad, covering any form of reacquisition or acquisition of equivalent securities, not just open market purchases.

Why is the definition of buying back securities important for UK tax purposes?

The definition is central to anti-avoidance provisions targeting transactions designed to convert income returns on securities into capital gains or to strip out entitlement to interest or dividends. If a reacquisition falls within this meaning, manufactured payments and bond-washing rules may apply, taxing amounts as income rather than capital.

Does the buying back definition under section 570 apply only to open market purchases?

No. The definition applies broadly and is not limited to purchases on the open market. It encompasses any form of reacquisition or acquisition of equivalent securities, regardless of the precise legal mechanism used. This ensures anti-avoidance provisions catch arrangements involving substantially similar securities obtained in place of those originally disposed of.

Can you give an example of buying back securities under section 570?

If a person sells UK government gilts before an interest payment date and then repurchases the same gilt issue afterwards, they have 'bought back' securities within section 570. The anti-avoidance provisions may then treat part of the proceeds or repurchase price as income rather than allowing purely capital treatment.

Income Tax Act 2007 section 570

Meaning of "buying back" securities etc.

Section 570 defines what is meant by "buying back" securities for the purposes of the rules on manufactured payments and bond-washing arrangements.

A person "buys back" securities if they reacquire the same securities they previously sold or transferred, or acquire similar securities of the same kind.
The concept covers not just straightforward repurchases but also arrangements where substantially similar securities are obtained in place of those originally disposed of.
This definition is central to anti-avoidance provisions that target transactions designed to convert income returns on securities into capital gains or to strip out entitlement to interest or dividends.
The definition applies broadly and is not limited to purchases on the open market — it encompasses any form of reacquisition or acquisition of equivalent securities.

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