Corporation Tax Act 2010 section 808

No tax credits for borrower under stock lending arrangement

Section 808 prevents a borrower in a stock lending arrangement from claiming tax credits on dividends that the borrower does not economically retain, but instead passes back to the lender.

• When shares are borrowed under a stock lending arrangement, any dividends received by the borrower during the lending period are typically passed back to the lender as manufactured dividends or by other means.
• Because the borrower does not economically benefit from the dividend — they are merely a temporary holder of the securities — the borrower is not entitled to claim a tax credit in respect of that dividend.
• This rule ensures that tax credits are only available to the party who genuinely bears the economic interest in the shares and retains the dividend income.
• The provision applies regardless of whether the dividend is returned to the lender as a manufactured dividend or through any other mechanism.