What does the disapplication of section 332 of the Corporation Tax Act 2009 mean for pre-October 2007 transactions?

Paragraph 66 of Schedule 2 disapplies section 332 for repo, stock lending and other transactions entered into before 1 October 2007. This means companies with these older arrangements continue to be taxed under the rules that applied when the transactions were originally established, rather than under the section 332 regime.

Which categories of transaction are excluded from section 332 of the Corporation Tax Act 2009?

Three categories are excluded: arrangements that would fall under Chapter 10 of Part 6 (alternative finance arrangements) predating 1 October 2007; stock lending arrangements under section 263B(1) TCGA 1992 where securities were transferred otherwise than by sale before that date; and any other disposal of securities occurring before 1 October 2007.

How does the grandfathering provision affect stock lending arrangements made before 1 October 2007?

Stock lending arrangements established before 1 October 2007 are excluded from section 332, provided the lender transferred securities to the borrower otherwise than by way of sale. The company continues to account for loan relationship credits and debits under the rules in place when the arrangement was made, preserving the original tax treatment.

Does section 332 apply to repo transactions entered into on or after 1 October 2007?

Yes. Section 332 applies in full to repo, stock lending and similar transactions commencing on or after 1 October 2007. The transitional disapplication under paragraph 66 of Schedule 2 only protects arrangements that were already in existence before that date. New transactions from that date onward are governed by the section 332 rules.

Corporation Tax Act 2009 section 332

Repo, stock lending and other transactions before 1 October 2007: disapplication of section 332

Section 332, which deals with the tax treatment of repo, stock lending and similar transactions involving loan relationships, is switched off for certain arrangements that were already in place before 1 October 2007.

Section 332 does not apply to arrangements that would fall under the alternative securities provisions (Chapter 10 of Part 6) had they not commenced before 1 October 2007.
It also does not apply to stock lending arrangements entered into before 1 October 2007 where the lender transferred securities to the borrower otherwise than by way of sale.
Any other disposal of securities that took place before 1 October 2007 is likewise excluded from section 332.
The effect is to preserve the pre-existing tax treatment for these older transactions, rather than subjecting them retrospectively to the section 332 rules.

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