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Posted Wed, 05 Apr 2023 18:43:27 GMT by SY C
Hi team, When we hold short position of stocks, we have to pay dividend to the lender of the stock position on dividend payment date. Could you advise how the payment is treated? Thank you.
Posted Fri, 14 Apr 2023 10:48:03 GMT by SY C
ChatGPT claims that short dividends are treated as income and are subject to income tax at your marginal rate. I would like to confirm whether it is true. Could you advise? Thanks.
Posted Fri, 14 Apr 2023 14:01:57 GMT by HMRC Admin 19

As you correctly say, investors who borrow stocks for short selling have to pay a dividend to the lender on the dividend payment date.

However,  we are not sure what you mean by 'how is the payment treated'? Please can you clarify. 

Thank you.
Posted Fri, 14 Apr 2023 16:21:52 GMT by SY C
Can the payment be used to deduct dividend tax, or income tax?
Posted Wed, 19 Apr 2023 14:18:45 GMT by HMRC Admin 18

When someone has borrowed a stock for short selling and a dividend is paid during the period, the holder of the stock is responsible for paying the lender an amount equal to the dividend amount. This payment is a payment in lieu of the dividend and would be declared by the lender as ‘Other Income’ on the SA return and so taxed at the lenders highest rate of tax.

Thank you.

Posted Wed, 19 Apr 2023 14:49:14 GMT by SY C
Hi, Thanks for the update. How about the borrower? How does the borrower declare the payment? Thanks.
Posted Wed, 19 Apr 2023 15:28:33 GMT by HMRC Admin 18

As it is classed as other income, any tax that had arleady been deducted would come under income tax.

Thank you.
Posted Wed, 26 Apr 2023 13:12:46 GMT by HMRC Admin 25
Hi SY C,

This would be declared as other income on TR3 of the Self Assessment Tax return by the borrower. 

Thank you. 

Posted Tue, 16 May 2023 14:22:44 GMT by yu329
Hi HMRC Admin, Where should I declare the payment in lieu of dividend received as lender, if the shares are foreign shares. I can't find the right box in the foreign section
Posted Tue, 23 May 2023 13:01:39 GMT by HMRC Admin 32

This would be classed as other income rather than dividends.

Thank you.

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