Quasi-stock lending and quasi-cash collateral are concepts
introduced in ICTA88/S736D by Finance Act 2006. These concepts are
used to extend the stock lending anti-avoidance provisions at
ICTA1988/S736C (
CFM17110) to cover arrangements that
seek to achieve the same economic effect as stock lending
arrangements with cash collateral, but are designed to fall outside
the tax definitions of those terms.
The provisions of ICTA88/S736D apply to any arrangement made
on or after 22 March 2006 and treat quasi-stock lending as if it
were stock lending and quasi-cash collateral as if it were cash
collateral for the purposes of ICTA1988/S736C. ICTA88/S736D also
ensures that where the tax advantage arising in a quasi-stock
lending arrangement was designed to be obtained by a person other
than the borrower in that arrangement, the interest arising on
quasi-cash collateral is deemed to be received by that other
person.
A quasi-stock lending arrangement is defined in ICTA88/S736D
(1) and includes any arrangements that are not stock lending
arrangements, but where the lender transfers securities to a
borrower and the borrower, or any other person, is then required to
transfer any of the securities or any other property back to the
lender, or any other person. This prevents substitution of
‘property’ (in any form) in place of original
securities and ‘any other person’ in place of the
original borrower or lender, into a standard stock lending
arrangement simply in order to circumvent the statutory definition
of stock lending arrangement given in TCGA1992/S263B.
Quasi-cash collateral is defined in ICTA 1998/S736D (2) in
relation to any stock lending arrangement or any quasi-stock
lending arrangement. Quasi-cash collateral is any money payable or
any other property transferable to the stock or quasi-stock lender,
or any person connected with the lender, for the purpose of
securing discharge of the requirement to return securities
transferred under the stock loan or quasi stock loan. This prevents
substitution of ‘property (in any form) in place of money in
cash collateral arrangements, or the payment or transfer of
quasi-cash collateral to a person other than the original lender in
the quasi-stock lending arrangement, simply in order to circumvent
ICTA88/S736C.
It is envisaged that ICTA88/S736D will block most potential
methods to circumvent ICTA88/S736C that may be exploited by the tax
avoidance industry.
