Corporation Tax Act 2009 section 541

Debits for deemed interest under stock lending arrangements disallowed

Section 541 prevents a company that borrows securities under a stock lending arrangement from claiming a tax debit for the deemed interest payment that arises under that arrangement.

• A company borrowing securities under a stock lending arrangement is treated as making a deemed payment representative of interest on those securities
• This deemed payment arises automatically under Corporation Tax Act 2010 section 812 and is not an actual cash outflow
• The borrower is specifically prohibited from bringing any loan relationship debits into account in respect of this deemed representative payment
• No tax deduction or group relief claim is available to the borrower company for the deemed interest payment