Part VII Other property, businesses, investments etc.

Miscellaneous reliefs and exemptions

263DF1Gains accruing to persons paying manufactured dividends

1

This section applies where one of the following conditions is satisfied in relation to a person who—

a

is resident in the United Kingdom, but

b

is not a company.

2

Condition 1 is that—

a

the person is the interim holder under a repurchase agreement,

b

he disposes of any F2UK shares transferred to him under that agreement,

c

a chargeable gain accrues to him on that disposal, and

d

under that agreement, he pays a manufactured dividend which is representative of a dividend on those F3UK shares.

3

Condition 2 is that—

a

the person is the borrower under a stock lending arrangement,

b

he disposes of any F4UK shares transferred to him under that arrangement,

c

a chargeable gain accrues to him on that disposal, and

d

under that arrangement, he pays a manufactured dividend which is representative of a dividend on those F5UK shares.

4

Condition 3 is that—

a

the person is a party to a contract or other arrangements for the transfer of F6UK shares which is neither a repurchase agreement nor a stock lending arrangement (“the short sale transaction”),

b

he disposes of the F7UK shares under the short sale transaction,

c

a chargeable gain accrues to him on that disposal, and

d

under that transaction, he pays a manufactured dividend which is representative of a dividend on those F8UK shares.

5

For the purposes of capital gains tax, a loss shall be treated as accruing to the person on the date on which the chargeable gain mentioned in Condition 1, 2 or 3 accrued to him.

6

The amount of that loss shall be equal to the lesser of—

a

the amount of that chargeable gain, and

b

the F17amount specified in subsection (7) below.

F187

The amount referred to in subsection (6) above is the lesser of—

a

the amount of the manufactured dividend paid, and

b

the amount of the dividend of which the manufactured dividend is representative.

8

But that loss shall not be deductible except from the chargeable gain mentioned in Condition 1, 2 or 3.

9

For the purposes of this section “manufactured dividend” has the same meaning as in F9Chapter 2 of Part 11 of ITA 2007 (manufactured payments); and any reference to a manufactured dividend being paid—

a

includes a reference to a payment falling by virtue of F10section 602(1) of that Act (deemed manufactured payments: repos) to be treated for the purposes of F11that Chapter of that Part of that Act as if it were made, but

b

does not include a reference to a payment falling by virtue of F12section 596(2) of that Act (deemed manufactured payments: stock lending arrangements) to be treated for the purposes of F13that Chapter of that Part of that Act as if it were made.

10

For the purposes of this section the cases where there is a repurchase agreement are F14those in which there is a repo for the purposes of Part 11 of ITA 2007 (see section 569 of that Act); and, in any such case, any reference to the interim holder shall be construed accordingly.

11

In this section “stock lending arrangement” has the same meaning as in section 263B of this Act; and, in relation to any such arrangement, any reference to the borrower shall be construed accordingly.

12

In this section “F15UK shares” has the meaning given by F16section 566(2) of ITA 2007.