Explanatory note
(This note is not part of the Regulations)
These Regulations amend the Income Tax (Stock Lending) Regulations 1989 (S.I. 1989/1299) (“the principal Regulations”) which provide that transfers under stock lending arrangements falling within section 129 of the Income and Corporation Taxes Act 1988 (“section 129”) shall be disregarded for tax purposes if certain conditions set out in the Regulations are fulfilled.
The amendments made may be categorised as follows:
amendments which together have the effect of removing all restrictions on the circumstances in which section 129 can apply to stock lending arrangements for the transfer of gilt-edged securities. The amendments reflect changes in the gilt-edged securities market which are due to take effect from 2nd January 1996;
provision for stock lending arrangements which terminate on redemption of the securities transferred under the arrangements to be included within the scope of section 129;
provision for loans under which securities are borrowed to meet a demand for the return of other securities (“replacement loans”) to be included within the scope of section 129.
Regulation 1 provides for citation and commencement, and regulation 2 for interpretation.
Regulation 3 inserts new definitions and amends existing definitions in regulation 2 (1) of the principal Regulations (interpretation).
Regulation 4 inserts regulations 3B and 3C in the principal Regulations. Regulation 3B provides that section 129 shall apply to a stock lending arrangement for the transfer of gilt-edged securities notwithstanding that the arrangement was not entered into to enable the borrower to fulfil a contract under which he was required to sell securities. Regulation 3C makes a similar provision in relation to replacement loans.
Regulation 5 amends regulation 4 of the principal Regulations in consequence of the deletion of regulation 5 of the principal Regulations (conditions relating to the transfer of gilt-edged securities) by regulation 6 of these Regulations.
Regulation 6 omits regulation 5 of the principal Regulations.
Regulations 7 to 11 make consequential amendments to regulations 6 to 8 of the principal Regulations as a result of the new definitions inserted in regulation 2 (1) of the principal Regulations by regulation 3 of these Regulations. In addition regulation 11(a) makes a drafting amendment to regulation 8 of the principal Regulations.
Regulation 12 adds a new regulation (regulation 9) to the principal Regulations which provides that section 129 shall apply in cases where stock lending arrangements terminate on redemption of the securities transferred under the arrangements. The regulation also specifies the conditions to be fulfilled if transfers, disposals and acquisitions made under such arrangements are to be disregarded for tax purposes, and modifies the operation of the Taxation of Chargeable Gains Act 1992 in relation to such disposals and acquisitions where the conditions are not fulfilled.