What is a quasi-stock lending arrangement under section 600 of the Income Tax Act 2007?

A quasi-stock lending arrangement is a transaction that replicates the economic effect of a formal stock lending arrangement without being one in legal terms. It involves one party transferring securities to another with an agreement or understanding that equivalent securities will be returned at a later date, such as a sale and repurchase arrangement.

What is quasi-cash collateral under United Kingdom tax law?

Quasi-cash collateral refers to cash or cash-equivalent amounts provided as security under a quasi-stock lending arrangement. It mirrors the concept of cash collateral in genuine stock lending transactions but applies where the arrangement is structured informally or outside the recognised stock lending framework, ensuring consistent tax treatment.

Why were the definitions of quasi-stock lending arrangement and quasi-cash collateral introduced?

These definitions exist to prevent the manufactured payments tax rules from being circumvented by structuring transactions outside the formal stock lending definition. By capturing arrangements with equivalent economic substance, the legislation ensures a consistent tax outcome regardless of the legal form chosen by the parties involved.

How does section 600 apply to a sale and repurchase arrangement involving shares?

If a company sells shares under a sale and repurchase arrangement where equivalent shares will be returned later and cash is provided, section 600 treats this as a quasi-stock lending arrangement. The cash provided constitutes quasi-cash collateral, and any manufactured dividends or interest arising are taxed as if formal stock lending had occurred.

Income Tax Act 2007 section 600

Meaning of "quasi-stock lending arrangements" and "quasi-cash collateral"

Section 600 defines what counts as a "quasi-stock lending arrangement" and what counts as "quasi-cash collateral" for the purposes of the tax rules on manufactured payments.

A quasi-stock lending arrangement is a transaction that, while not a formal stock lending arrangement, has an equivalent economic effect — one party transfers securities to another with an agreement or understanding that equivalent securities will be returned
These arrangements are caught by the manufactured payments rules to prevent avoidance through structuring transactions outside the formal stock lending framework
Quasi-cash collateral refers to cash or cash-equivalent amounts provided under such arrangements, mirroring the concept of cash collateral in genuine stock lending but arising in the context of these quasi-arrangements
The definitions were amended by Finance Act 2013 to ensure they remain aligned with the broader legislative framework governing manufactured payments and stock lending

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