CFM17085 - Stock loans: capital gains – disposal of borrowed shares during a stock loan

Capital gains – what happens when the borrower disposes of shares under a stock loan

The borrower under a stock loan may sell or lend shares it has borrowed and repay the loan with other shares. Where the borrower sells the shares (otherwise than under a sale and repurchase agreement, see CFM17155) a chargeable gain or loss may arise. In calculating the gain or loss, the shares sold are deemed to be those with which the borrower repaid the loan. This ensures that their cost for capital gains purposes is the cost of the shares used to repay the loan. This rule is subject to the normal operation of the share identification rules in TCGA92/S104 - S108.