Section 263CA: Stock lending: insolvency etc of borrower, Taxation of Chargeable Gains Act 1992

This section applies where, in the case of any stock lending arrangement—

the borrower (B) becomes insolvent after the lender (L) has transferred the securities,

as a result of the insolvency, the requirement for B to make a transfer back to L will not be complied with as regards some or all of the securities,

collateral is used (whether directly or indirectly) to enable L to acquire securities ("replacement securities") of the same description as the securities which will not be transferred back, and

the replacement securities are acquired before the end of the period of 30 days beginning with the day on which B becomes insolvent ("the insolvency date").

In accordance with section 263B(2), the transfer of the securities under the arrangement is not to be regarded as a disposal by L for the purposes of this Act (but this is subject to subsection (5)).

B is to be treated for the purposes of this Act as having acquired the securities which will not be transferred back to L; and that acquisition is to be treated—

as being made on the insolvency date, and

as being for a consideration equal to their market value on that date.

The acquisition of the replacement securities is to be treated, as regards L, as if it were a transfer back of securities in accordance with the arrangement (so that, in accordance with section 263B(2), that acquisition is not regarded as an acquisition by L for the purposes of this Act).

If the number of replacement securities is less than the number of securities which B is treated as having acquired, L is to be treated for the purposes of this Act as having made a disposal, at the insolvency date, of the difference ("the deemed disposal").

The consideration for the deemed disposal is—

where all the collateral is used to enable L to acquire replacement securities, nil, and

where not all the collateral is so used, the difference between—

the market value (at the insolvency date) of the number of securities which could have been acquired using the collateral, and

the market value (at that date) of the number of securities which were in fact so acquired.

But if L at any time receives any amount (whether arising out of B's insolvency or otherwise) in respect of B's liability to L in respect of the securities which are treated under subsection (5) as having been disposed of by L that amount is to be treated as a chargeable gain accruing at that time to L.

The liability mentioned in subsection (7) is not to be treated as giving rise to a relevant non-lending relationship for the purposes of Part 6 of CTA 2009 (relationships treated as loan relationships etc).

For the purposes of this section, B becomes insolvent—

if a company voluntary arrangement takes effect under Part 1 of the Insolvency Act 1986,

if an administration application (within the meaning of Schedule B1 to that Act) is made or a receiver or manager, or an administrative receiver, is appointed,

on the commencement of a creditor's voluntary winding up (within the meaning of Part 4 of that Act) or a winding up by the court under Chapter 6 of that Part,

if an individual voluntary arrangement takes effect under Part 8 of that Act,

on bankruptcy application made or the presentation of a bankruptcy petition (within the meaning of Part 9 of that Act),

if a compromise or arrangement takes effect under Part 26 or 26A of the Companies Act 2006,

if a bank insolvency order takes effect under Part 2 of the Banking Act 2009,

if a bank administration order takes effect under Part 3 of that Act, or

on the occurrence of any corresponding event which has effect under or as a result of the law of Scotland or Northern Ireland or a country or territory outside the United Kingdom.

In this section—

"collateral" means an amount of money or other property which—

is provided under the arrangement (or under arrangements of which the arrangement forms part), and

is payable to or made available for the benefit of L for the purpose of securing the discharge of the requirement to transfer any or all of the securities back to L, and

any expression used in this section and in section 263B has the same meaning as in that section.

Section 263CA: Stock lending: insolvency etc of borrower

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