Corporation Tax Act 2010 section 812

Deemed manufactured payments: stock lending arrangements

Section 812 addresses situations where a borrower in a stock lending arrangement is treated as making a manufactured payment even though the arrangement does not actually require one.

• In most stock lending arrangements, the borrower compensates the lender for dividends or interest missed during the loan period by making a manufactured payment.
• Some arrangements are structured so that the lender receives no such compensation, despite having given up income on the lent securities.
• Where no manufactured payment is required, this section deems the borrower to have made one, bringing the normal manufactured payment rules into effect — including, for overseas securities, treating the lender as receiving a manufactured overseas dividend.
• Although the borrower is deemed to have made the payment, it is denied any tax relief for the deemed manufactured payment.