Finance Bill 2002
Amendment 144
Page: 304 Line: 2
Mr Andrew Smith (Labour, Oxford East)
144
Schedule 25, page 304, line 2, at end insert-
'but nothing in sub-paragraph (1) or paragraph (b) above shall prevent any credit in respect of interest from being brought into account for the purposes of this Chapter by the person described in that paragraph.'.
EXPLANATORY NOTE
SUMMARY
1. The purpose of the amendment is to ensure that the interim holder of a repo or stock loan is charged to tax on any interest he receives.
DETAILS OF THE AMENDMENT
2. The amendment inserts some further words into paragraph 15(4A) Schedule 9 FA 1996 (inserted by paragraph 32(2) Schedule 25 to the Bill). Paragraph 15(4A) ensures that where there is a repo (a sale and repurchase transaction in a debt security ) or where a debt security is lent by one person to another (a stock loan), the interim holder (the transferee or borrower) does not bring any amounts relating to the debt into account for tax purposes.
3. However this sub-paragraph goes too far and should have made an exception for any interest received by the interim holder. This is because that holder will usually pay an amount to the transferor or lender representing that interest and will be able to claim relief for that payment while the transferor or lender will be charged to tax on that deemed payment of interest. If the interim holder is not taxed on the interest he receives there will be a mismatch.
BACKGROUND
4. The measures included in the Finance Bill as Schedule 25 represent the outcome of a major consultative process between the Government and representatives of, and advisers to, business. Two Consultative documents and a Technical Note have been produced, and two rounds of draft clauses have been published, most recently on 19 December 2001.
5. These amendments take account of representations made in response to the publication of the Bill.