Taxation of Chargeable Gains Act 1992 section 263C

Stock lending involving redemption

Section 263C deals with what happens for capital gains tax purposes when securities that have been lent under a stock lending arrangement are redeemed before they can be returned to the lender.

• Where lent securities are redeemed, paying the lender an amount equal to the redemption entitlement counts as transferring the securities back
• The lender is treated as having disposed of the redeemed securities for the amount received, triggering any chargeable gain or loss
• The borrower is not treated as having made any disposal on the redemption of the lent securities
• If the borrower disposed of any of the lent securities before redemption, the redemption payment to the lender is treated as a cost of acquiring replacement securities to return to the lender