Income Tax Act 2007

596 Deemed manufactured payments: stock lending arrangements

(1) This section applies if—

(a) there is a stock lending arrangement in respect of securities,

(b) a dividend or interest on the securities is paid, as a result of the arrangement, to a person other than the person who is the lender under the arrangement, and

(c) no provision is made for securing that the lender receives payments representative of the dividend or interest.

(2) The rules about manufactured payments apply as if the person who is the borrower under the arrangement—

(a) were required, under the arrangement, to pay the lender an amount representative of the dividend or interest, and

(b) discharged the requirement when the dividend or interest was paid.

(3) But the borrower is not entitled (whether as a result of the rules about manufactured payments or otherwise) to an income deduction in respect of the deemed requirement to pay or the deemed payment.

(4) “Income deduction” means—

(a) a deduction in calculating profits or gains for income tax purposes, or

(b) a deduction in calculating net income.

(5) For the purposes of this section, a quasi-stock lending arrangement is treated as if it were a stock lending arrangement.