Taxation of Chargeable Gains Act 1992 Schedule 7AC paragraph 12

Effect of repurchase agreement

Paragraph 12 deals with how sale and repurchase (repo) arrangements affect whether a company meets the substantial shareholding requirement for the purposes of the substantial shareholdings exemption.

• Where a company (the borrower) sells shares under a repo arrangement and the sale is ignored for corporation tax on chargeable gains purposes, the borrower is treated as continuing to hold the shares throughout the arrangement period.
• The borrower retains all rights attaching to the shares, including rights to distributable profits and assets on a winding up, so only the borrower can count those shares towards the substantial shareholding requirement.
• The counterparty (the lender) is treated as not holding the shares and as not being entitled to any rights attached to them during the arrangement period.
• If the borrower or a fellow group member reacquires the shares (or shares representing them) before the arrangement ends, the deemed continued holding by the borrower ceases from that point for the shares in question.