4

In this section “stock lending arrangement” has the same meaning as in section 263B of the 1992 Act.

263B Stock lending arrangements.

1

In this section “stock lending arrangement” means so much of any arrangements between two persons (“the borrower” and “the lender”) as are arrangements under which—

a

the lender transfers securities to the borrower otherwise than by way of sale; and

b

a requirement is imposed on the borrower to transfer those securities back to the lender otherwise than by way of sale.

2

Subject to the following provisions of this section and section 263C(2), the disposals and acquisitions made in pursuance of any stock lending arrangement shall be disregarded for the purposes of capital gains tax.

3

Where—

a

the borrower under any stock lending arrangement disposes of any securities transferred to him under the arrangement,

b

that disposal is made otherwise than in the discharge of the requirement for the transfer of securities back to the lender, and

c

that requirement, so far as it relates to the securities disposed of, has been or will be discharged by the transfer of securities other than those transferred to the borrower,

any question relating to the acquisition of the securities disposed of shall be determined (without prejudice to the provisions of Chapter I of Part IV) as if the securities disposed of were the securities with which that requirement (so far as relating to the securities disposed of) has been or will be discharged.

4

Where, in the case of any stock lending arrangement, it becomes apparent, at any time after the making of the transfer by the lender, that the requirement for the borrower to make a transfer back to the lender will not be complied with—

a

the lender shall be deemed for the purposes of this Act to have made a disposal at that time of the securities transferred to the borrower;

b

the borrower shall be deemed to have acquired them at that time; and

c

subsection (3) above shall have effect in relation to any disposal before that time by the borrower of securities transferred to him by the lender as if the securities deemed to have been acquired by the borrower in accordance with paragraph (b) above were to be used for discharging a requirement to transfer securities back to the lender.

5

References in this section, in relation to a person to whom securities are transferred, to the transfer of those securities back to another person shall be construed as if the cases where those securities are taken to be transferred back to that other person included any case where securities of the same description as those securities are transferred to that other person either—

a

in accordance with a requirement to transfer securities of the same description; or

b

in exercise of a power to substitute securities of the same description for the securities that are required to be transferred back.

6

For the purposes of this section securities shall not be taken to be of the same description as other securities unless they are in the same quantities, give the same rights against the same persons and are of the same type and nominal value as the other securities.

7

In this section—

• “interest” includes dividends; and

• “securities” means United Kingdom equities, United Kingdom securities or overseas securities (within the meaning, in each case, of Schedule 23A to the Taxes Act).

263C Stock lending involving redemption.

1

In section 263B references to the transfer back to a person of securities transferred by him shall be taken to include references to the payment to him, in pursuance of an obligation arising on any person’s becoming entitled to receive an amount in respect of the redemption of those securities, of an amount equal to the amount of the entitlement.

2

Where, in pursuance of any such obligation, the lender under any stock lending arrangement is paid any amount in respect of the redemption of any securities to which the arrangement relates—

a

that lender shall be deemed for the purposes of this Act to have disposed, for that amount, of the securities in respect of whose redemption it is paid (“the relevant lent securities”);

b

the borrower shall not, in respect of the redemption, be taken for the purposes of this Act to have made any disposal of the relevant lent securities; and

c

section 263B(3) shall have effect in relation to disposals of any of the relevant lent securities made by the borrower before the redemption as if—

i

the amount paid to the lender were an amount paid for the acquisition of securities, and

ii

the securities acquired were to be used by the borrower for discharging a requirement under the arrangement to transfer the relevant lent securities back to the lender.

3

Expressions used in this section and section 263B have the same meanings in this section as in that section.

Manufactured dividends on UK equities: general

2

1

This paragraph applies in any case where, under a contract or other arrangements for the transfer of United Kingdom equities, one of the parties (a “dividend manufacturer”) is required to pay to the other (“the recipient”) an amount (a “manufactured dividend”) which is representative of a dividend on the equities.

2

A manufactured dividend paid by a dividend manufacturer who is a company resident in the United Kingdom shall be treated for the purposes of the Tax Acts as if the amount paid were a dividend of the dividend manufacturer.

3

Where a manufactured dividend to which sub-paragraph (2) above does not apply is paid by any person—

a

an amount of tax representing the advance corporation tax that would have been payable in respect of the manufactured dividend if—

i

the dividend manufacturer were a company resident in the United Kingdom, and

ii

the manufactured dividend were a distribution by that company,

shall be accounted for to the extent, and in the manner, specified in dividend manufacturing regulations;

b

the Tax Acts shall have effect in relation to the recipient, and persons claiming title through or under him, as if the manufactured dividend were a dividend on the United Kingdom equities in question; and

c

the Tax Acts shall have effect in relation to the dividend manufacturer subject to the provisions of paragraph 2A below.

4

The persons who, under dividend manufacturing regulations, may be made liable to account for an amount of tax as mentioned in sub-paragraph (3)(a) above are—

a

the dividend manufacturer, in the case of a manufactured dividend to which sub-paragraph (5) below applies; and

b

the recipient, in the case of a manufactured dividend to which that sub-paragraph does not apply.

5

This sub-paragraph applies to a manufactured dividend if—

a

the dividend manufacturer is a person resident in the United Kingdom who is not a company; or

b

the following two conditions are satisfied in the case of that manufactured dividend, that is to say—

i

the dividend manufacturer is a company that is not so resident but carries on a trade in the United Kingdom through a branch or agency; and

ii

the requirement to pay the manufactured dividend is attributable to the carrying on of a trade carried on through that branch or agency.

6

Subject to paragraph 2B(2)(b) below, where—

a

a dividend manufacturer pays a manufactured dividend, and

b

that dividend manufacturer is, in respect of that dividend, required under dividend manufacturing regulations to account for an amount of tax such as is mentioned in sub-paragraph (3)(a) above,

the dividend manufacturer shall, on paying the manufactured dividend, provide the recipient with a statement in writing setting out the matters specified in sub-paragraph (7) below.

7

Those matters are—

a

the amount of the manufactured dividend;

b

the date of the payment of the manufactured dividend; and

c

the amount of the tax credit to which, by virtue of sub-paragraph (3)(b) above, the recipient or a person claiming title through or under him either—

i

is entitled in respect of the manufactured dividend, or

ii

would be so entitled were all the conditions of a right to a tax credit satisfied, in the case of the recipient or that person, as respects the dividend which the recipient is deemed to receive.

8

The duty imposed by sub-paragraph (6) above shall be enforceable at the suit or instance of the recipient.

Deductibility of manufactured payment in the case of the manufacturer

2A

1

Where, in the case of a manufactured dividend, the dividend manufacturer—

a

is resident in the United Kingdom, but

b

is not a company,

the amount of the manufactured dividend actually paid (so far as is it is not otherwise deductible), together with an amount equal to the notional ACT, shall be allowable for the purposes of income tax as a deduction against the total income of the dividend manufacturer.

2

Where, in the case of a manufactured dividend, the dividend manufacturer is a company which is not resident in the United Kingdom, no amount at all shall be deductible, in the case of that company, in respect of the payment of that manufactured dividend.

3

The reference in sub-paragraph (1) above to an amount equal to the notional ACT is a reference to the amount equal to the advance corporation tax that would be payable in respect of the manufactured dividend if—

a

the dividend manufacturer were a company resident in the United Kingdom, and

b

the manufactured dividend were a distribution by that company.

4

The references in this paragraph to an amount being deductible are references to its being either—

a

deductible in computing the amount of any of the dividend manufacturer’s profits or gains for the purposes of income tax or corporation tax; or

b

deductible for those purposes from the total income or, as the case may be, total profits of the dividend manufacturer.

Manufactured dividends representative of foreign income dividends

2B

1

Where a manufactured dividend to which paragraph 2(2) above applies is representative of a foreign income dividend, the Tax Acts shall have effect for all purposes as if—

a

the deemed dividend of the dividend manufacturer were itself a foreign income dividend; and

b

that foreign income dividend were one in respect of which the dividend manufacturer is not liable to make any payment of advance corporation tax.

2

Where a manufactured dividend to which paragraph 2(3) above applies is representative of a foreign income dividend—

a

the Tax Acts shall have effect, in relation to the recipient and any persons claiming title through or under him, as if the dividend on the United Kingdom equities which the recipient is treated as having received were a foreign income dividend;

b

there shall be no requirement for any person to account for tax in respect of that manufactured dividend by virtue of paragraph 2(3)(a) above;

c

any deduction made in respect of the manufactured dividend under paragraph 2A(1) above shall be made without including an amount equal to the notional ACT in the deduction; and

d

the dividend manufacturer, on paying the manufactured dividend in any case falling within sub-paragraph (3) below, shall provide the recipient with a statement in writing setting out the matters specified in sub-paragraph (4) below.

3

A case falls within this sub-paragraph where, were it not for sub-paragraph (2)(a) and (b) above, the dividend manufacturer would be required to provide such a statement as is mentioned in paragraph 2(6) above.

4

Those matters are—

a

the amount of the manufactured dividend;

b

the date on which it is paid;

c

the fact that the dividend carries no entitlement to a tax credit; and

d

in the case of a manufactured dividend which is representative of a qualifying distribution to which Schedule 7 to the Finance Act 1997 applies, the fact that the distribution is a foreign income dividend by virtue of paragraph 2(1) of that Schedule.

5

The Board may give directions as to the form that must be taken by a statement provided for the purposes of sub-paragraph (2)(d) above.

6

The duty imposed by sub-paragraph (2)(d) above shall be enforceable at the suit or instance of the recipient.

by persons by or to whom manufactured dividends, manufactured interest or manufactured overseas dividends are paid.

1

The Board may exercise the powers conferred by this section as respects, and in connection with, any business consisting in or involving dealings in securities; and for the purposes of this section it shall be immaterial whether those dealings are or, as the case may be, were—

a

on behalf of persons other than the person carrying on the business;

b

by that person on his own behalf; or

c

a mixture of the two.

4

Where a person (“the recipient”) who is not a broker has directly or indirectly received from another person any payment which—

a

is made by that other person in the course of a business within subsection (1) above, and

b

is a payment treated by that other person as made in respect of interest on securities,

the Board may by notice in writing require the recipient to state, within a time specified in the notice, whether the amount received is in whole or in part received on behalf of, or for payment on to, a third person and (if it is) to furnish the name and address of that third person.

4A

Where a person (“the payer”) has directly or indirectly paid to another person any sum which—

a

constitutes a receipt by that other person in the course of a business within subsection (1) above, and

b

is a receipt treated by that other person as accruing in respect of interest on securities,

the Board may by notice in writing require the payer to state, within a time specified in the notice, whether the amount paid is in whole or in part received from, or paid on account of, a third person and (if it is) to furnish the name and address of that third person.

5A

Where it appears to the Board that a person may have incurred a liability to pay or account for tax under Schedule 23A to the principal Act (manufactured payments), the Board may by notice served on that person require him, within such period (not being less than 28 days) as may be specified in the notice, to provide the Board with information which—

a

is available to that person; and

b

is or may be relevant to whether that person has incurred such a liability, or to the extent of such a liability.

7

In this section—

• “broker” means any person who is a member of a recognised investment exchange, within the meaning of the M5Financial Services Act 1986;

• “interest” includes dividends;

• “securities” includes shares and stock; and

• “securities transaction” means—

  1. a

     any transaction in securities;

  2. b

     any transaction under which a payment which is representative of any interest on a security has been, is to be or may be made; or

  3. c

     the making or receipt of such a payment.