CFM6000 - Taxing loan relationships: repo and stock lending: introduction

Overview

This guidance describes the post-FA2002 taxation of loan relationships, derivative contracts and forex

Repo and stock-lending are transactions in securities. Repo is used as a form of secured lending, with the transferred securities as collateral. Both repo and stock loans are also used to provide market makers with sources of stock to cover short positions.

The terms of a repo or stock-lending transaction usually require that the current holder of the securities passes on the benefit of any interest or dividends received to the original owner. These are known as manufactured payments.

The vast majority of these transactions are carried out by companies operating in the financial markets. As repos are like secured loans, the loan relationship rules apply to some aspects of these transactions, but not all. Individuals may also enter into repo or stock-lending transactions, and make or receive manufactured payments (though very rarely). You'll find guidance on the main taxing provisions in the Inspector's Manual.

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