INTM552190 - Hybrids: hybrid transfers (Chapter 4): the financial trader exclusion – conditions to be satisfied: condition B

Condition B at s259DE(4) and (5) is met where the financial trader brings associated payments into account.

These are payments that are received by, or made by, the financial trader and relate to the underlying instrument or an arrangement that relates to the underlying instrument.

In the illustration in INTM552170, the dividend on the shares borrowed, if actually received by the UK bank, would be an associated return, as would the UK bank’s return on some other transaction it enters into relating to the shares borrowed. Here, the UK bank is trading for tax purposes and the value of the dividend received forms part of its taxable trading income, but it is also allowed as a deduction the substitute payment made to the investment company who is the lending the shares.