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Recent changes to the repo rules are arbitrary and draconian

On 9 February 2010 the Financial Secretary to the Treasury announced certain amendments to the repo rules in CTA 2009 Part 6 Chapter 10 and FA 2007 Sch 13. The amendments have now been enacted as FA 2010 s 45.

The effect of s 45 is to treat manufactured payments received by the seller under a repo as taxable if those payments are in accordance with generally accepted accounting practice recognised or taken into account in determining the seller's profit or loss. Under the original repo rules the position was that the repo seller was deemed not to receive any manufactured payments for corporation tax purposes and was instead treated as though it continued to hold the securities sold to the repo buyer.

Pursuant to s 45(3) the amendments are 'treated as always having had effect'. That is to say they apply to...

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