SCHEDULES
F1SCHEDULE 7ACExemptions for disposals by companies with substantial shareholding
Part 2The substantial shareholding requirement
Effect of stock lending arrangements
13
1
This paragraph applies where—
a
a company that holds shares in another company transfers the shares under a stock lending arrangement, and
b
by virtue of section 263B(2) (stock lending arrangements) the disposal is disregarded for the purposes of the enactments relating to chargeable gains.
2
During the period of the stock lending arrangement—
a
the lender shall be treated for the purposes of this Part as continuing to hold the shares transferred and accordingly as retaining his entitlement to any rights attached to them, and
b
the borrower shall be treated for those purposes as not holding the shares transferred and as not becoming entitled to any such rights.
This is subject to the following qualification.
3
If at any time before the end of the period of the stock lending arrangement the lender, or another member of the same group as the lender, becomes the holder—
a
of any of the shares transferred, or
b
of any shares directly or indirectly representing any of the shares transferred,
sub-paragraph (2) does not apply after that time in relation to those shares or, as the case may be, in relation to the shares represented by those shares.
4
In this paragraph a “stock lending arrangement” means arrangements between two persons (“the borrower” and “the lender”) under which—
a
the lender transfers shares to the borrower otherwise than by way of sale, and
b
a requirement is imposed on the borrower to transfer those shares back to the lender otherwise than by way of sale.
5
Any reference in this paragraph to the period of a stock lending arrangement is to the period beginning with the transfer of the shares by the lender to the borrower and ending—
a
with the transfer of the shares back to the lender in pursuance of the arrangement, or
b
when it becomes apparent that the requirement for the borrower to make a transfer back to the lender will not be complied with.
6
The following provisions apply for the purposes of this paragraph as they apply for the purposes of section 263B—
a
subsections (5) and (6) of that section (references to transfer back of securities to include transfer of other securities of the same description);
b
section 263C (references to transfer back of securities to include payment in respect of redemption).
Sch. 7AC inserted (with effect in accordance with s. 44(3)(4) of the amending Act) by Finance Act 2002 (c. 23), Sch. 8 para. 1