Irish Revenue has issued eBrief No. 199/21 concerning an update to Tax and Duty Manual Part 04-06-13 on the Tax Treatment of Stock Lending and Sale and Repurchase (Repo) Transactions. The manual has been updated to reflect the Finance Act 2019 provisions relating to stock lending and repo transactions. The introduction to the tax treatment as provided in the updated guide is as follows:

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3. Tax Treatment

3.1 Introduction

The corporation tax treatment of stock lending and repo transactions was previously dealt with by way of a Statement of Practice which was set out in the previous version of this Manual.

From 1 January 2020 the tax treatment of those transactions is set out in Chapter 3 of Part 28 of the Taxes Consolidation Act 1997, on which guidance is provided in this updated Manual. Where applicable, an entity must follow the treatment in relation to all transactions which meet the qualifying criteria, which are set out in Chapter 2 of this Manual. That tax treatment is that the economic substance of a stock lending/repo transaction will be recognised for corporation tax purposes rather than the legal position. This means that the accounting profit earned (being the fee or margin) shall be taxed in accordance with the provisions set out in Chapter 3 of Part 28 of TCA 1997.

Where a stock lending or repo transaction is carried on in the course of a corporate trade, the practice of calculating profits chargeable to corporation tax in accordance with accounting profits rather than in accordance with Chapter 3 of Part 9 shall continue.

The timing of profits recorded for qualifying transactions should be based on the timing of the profits per the accounts prepared (under IFRS or UK/Irish GAAP) rather than actual amounts received in the financial year.

It should be noted that the anti-hybrid rules (refer to TDM Part 35C-00-01), are applied after the tax treatment provided for by Chapter 3 of Part 9. In the context of all stock lending and repo transactions (and not just those to which Chapter 3 of Part applies), particular regard should be had to:

• Chapter 4 of Part 35C which deals with deduction / non-inclusion outcomes arising on Financial Instruments,
• Chapter 6 of Part 35C which deals with withholding tax mismatch outcomes, and
• Chapter 9 of Part 35C which deals with mismatch outcomes arising from structured arrangements.