What is the purpose of section 925E of the Income Tax Act 2007?

Section 925E identifies circumstances involving non-standard repurchase agreements (repos) that trigger section 925D's power to modify the manufactured payments rules by regulations. It applies where a company has a repo and securities have been sold, provided at least one of three conditions — A, B or C — is met.

What are the three conditions in section 925E that make a repo non-standard?

Condition A applies where the sold securities are never bought back. Condition B applies where different or additional securities are treated as included with the originally sold securities for repurchase purposes. Condition C applies where certain securities are treated as excluded from those representing the originally sold securities for repurchase purposes.

What preliminary requirements must be met before section 925E applies?

Two preliminary requirements must be satisfied: the company must have a repo as defined in section 925D(5), and there must have been a sale of securities under the repo arrangement. Once both requirements are met, at least one of the three conditions — A, B or C — must also be satisfied for the section to apply.

Can you give an example of a non-standard repo under section 925E?

If a company sells gilts under a repo but the repurchase leg requires buying back those gilts plus additional corporate bonds not part of the original sale, Condition B is met because different or additional securities are included with the originally sold securities for repurchase purposes. Section 925D's regulation-making power is therefore triggered.

Income Tax Act 2007 section 925E

Cases where section 925D applies: non-standard repos

Section 925E identifies the circumstances involving non-standard repurchase agreements (repos) that trigger the application of section 925D's power to modify the repo rules.

The section applies where a company has a repo and securities have been sold under the repo arrangement, provided at least one of three conditions (A, B or C) is met.
Condition A is that the securities sold (or similar or other securities) are never subsequently bought back under the arrangement — in other words, the repo is not completed in the normal way.
Condition B is that the arrangement provides for different or additional securities to be treated as representing (or included with) the securities originally sold, for the purposes of any subsequent repurchase.
Condition C is that the arrangement provides for certain securities to be treated as excluded from those representing the securities originally sold for the purposes of any subsequent repurchase.

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