Taxation of Chargeable Gains Act 1992 section 261G

Price differences under repos: effect on repurchase price

Section 261G adjusts the repurchase price in a repo transaction for capital gains tax purposes, so that any element already treated as interest under income tax rules is stripped out and does not also give rise to a chargeable gain or allowable loss.

• The section applies where a price difference in a repo is treated as a payment of interest for income tax purposes and the repo is not already excluded from CGT by the separate rule that disregards disposals and acquisitions under repo arrangements.
• Where the repurchase price exceeds the sale price, the repurchase price is reduced for CGT purposes by the amount treated as interest, preventing the interest element from inflating the base cost.
• Where the sale price exceeds the repurchase price, the repurchase price is increased for CGT purposes by the amount treated as interest, preventing the interest element from artificially creating or enlarging a capital gain.
• All terminology in this section carries the same meaning as in the corresponding income tax provisions dealing with additional consequences of price differences under repos.