Corporation Tax Act 2010 section 809

No tax credits for lender under creditor repo or creditor quasi-repo

Section 809 prevents a lender in a creditor repo or creditor quasi-repo arrangement from claiming tax credits on dividends that the lender does not economically retain.

• Where a company lends shares under a creditor repo or creditor quasi-repo, it may not claim a tax credit in respect of dividends on those shares.
• The restriction applies because the lender does not genuinely bear the economic benefit of the dividend — instead, the dividend value is passed on to the counterparty.
• The passing-on of the dividend benefit may take the form of a manufactured dividend or any other equivalent payment or arrangement.
• The section also takes into account provisions under section 925A of the Income Tax Act 2007 relating to the treatment of manufactured payments.