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HMRC internal manual

Corporate Finance Manual

Other tax rules on corporate finance: stock loans: capital gains

Capital gains: transfers of securities under stock loans

TCGA92/S263B provides that acquisitions and disposals of securities under a stock lending arrangement are normally to be disregarded for the purposes of Capital Gains Tax or Corporation Tax on chargeable gains (‘for capital gains purposes’). The transactions disregarded are limited to the initial transfer to the borrower and the final transfer back to the lender.

Stock lending arrangements are defined in TCGA92/S263B as arrangements between two persons (the borrower and the lender) whereby the lender transfers securities to the borrower and the borrower is required to transfer those securities back to the lender. Both transfers must be other than by way of sale.

‘Securities’ includes UK shares, UK debt securities and overseas securities (both shares and debt). For companies, debt securities are within the loan relationships legislation and are outside the capital gains charge. See CFM33290.

An arrangement that includes the ability to transfer back equivalent securities is also included provided that the securities returned are in the same quantities, have the same rights attached to them and are of the same type and nominal amount as the originals.

Quasi-stock lending arrangements may be used in tax avoidance to circumvent the TCGA92/S263B definition of a commercial stock lending arrangement. See CFM74180.

Accrued income scheme

ITA07/S653 excludes transfers of securities in a stock lending arrangement from the scope of the accrued income scheme where the Capital Gains tax exemption of TCGA92/S263B applies to the transfers. This rule is only relevant to non-corporates.