|
| |
|
Manufactured overseas dividends |
| |
581 | Manufactured overseas dividends |
| |
(1) | This section applies if— |
| |
(a) | a person (“the payer”) pays another person an amount (a |
| |
“manufactured overseas dividend”) which is representative of an |
| 5 |
overseas dividend on overseas securities, |
| |
(b) | the payer does so under a requirement of an arrangement between |
| |
them for the transfer of the securities, and |
| |
(c) | the condition in subsection (2) is met. |
| |
(2) | The condition is that— |
| 10 |
(a) | in a case within section 855(1) (manufactured overseas dividends: |
| |
payments by UK residents etc), the amount required to be deducted as |
| |
a result of that section has been deducted, or |
| |
(b) | in a case within section 856(1) (foreign payers of manufactured |
| |
overseas dividends: the reverse charge), the amount of income tax |
| 15 |
required to be accounted for and paid as a result of that section has been |
| |
| |
(3) | Subsections (4) and (5) apply in relation to the recipient, and all persons |
| |
claiming title through or under the recipient, for all relevant income tax |
| |
| 20 |
(4) | The manufactured overseas dividend is treated as if it were— |
| |
(a) | an overseas dividend of an amount equal to the gross amount of the |
| |
manufactured overseas dividend, but |
| |
(b) | paid after the withholding from it, on account of overseas tax, of the |
| |
amount deducted as a result of section 855 or (as the case may be) |
| 25 |
accounted for and paid as a result of section 856. |
| |
(5) | The amount deducted or accounted for and paid is accordingly to be treated as |
| |
an amount withheld on account of overseas tax instead of as an amount on |
| |
| |
(6) | In this section “relevant income tax purposes” means the purposes of the |
| 30 |
Income Tax Acts as they apply in relation to— |
| |
| |
(b) | persons carrying on business through a branch or agency in the United |
| |
| |
582 | Powers about manufactured overseas dividends |
| 35 |
(1) | The Treasury may by regulations make provision as mentioned in subsections |
| |
(2) and (3) about prescribed cases where a person— |
| |
(a) | pays or receives a manufactured overseas dividend as mentioned in |
| |
| |
(b) | is treated as doing so for any purposes of this Chapter or regulations |
| 40 |
| |
(2) | The regulations may provide for removing or reducing any right of the person |
| |
to claim relief under Part 18 of ICTA (double taxation relief). |
| |
|
| |
|
| |
|
(3) | The regulations may provide for adjusting a relevant amount by reference to a |
| |
provision which has effect under the law of a territory outside the United |
| |
| |
(4) | A “relevant amount” is an amount which is treated for prescribed income tax |
| |
purposes as the amount paid or payable to a person in respect of a relevant |
| 5 |
| |
(5) | A “relevant transaction” is a sale, repurchase or other transfer of the overseas |
| |
securities to which the manufactured overseas dividend relates. |
| |
| |
583 | Manufactured payments exceeding underlying payments |
| 10 |
(1) | This section applies if— |
| |
(a) | an amount paid by way of manufactured dividend would otherwise |
| |
exceed the amount of the dividend of which it is representative, or |
| |
| |
(i) | an amount paid by way of manufactured interest or |
| 15 |
manufactured overseas dividend, and |
| |
(ii) | the income tax required to be accounted for and paid in |
| |
connection with the making of the payment, |
| |
| would otherwise exceed the gross amount of the interest or overseas |
| |
dividend of which it is representative. |
| 20 |
(2) | The payment, to the extent of an amount equal to the excess, is treated for the |
| |
purposes of this Chapter and Chapter 9 of Part 14 as not made under the |
| |
requirement mentioned in section 573(1)(b), 578(1)(b) or 581(1)(b) (criteria for |
| |
application of provisions about manufactured payments). |
| |
(3) | Instead it is treated, to that extent, for income tax purposes as a separate fee for |
| 25 |
entering into the arrangement under which it was made. |
| |
(4) | Subsection (3) applies despite anything in— |
| |
(a) | sections 572 to 582 (main rules about manufactured payments), or |
| |
(b) | Chapter 9 of Part 14 (deduction of income tax at source: manufactured |
| |
| 30 |
584 | Manufactured payments less than underlying payments |
| |
(1) | This section applies if the sum of— |
| |
(a) | an amount paid by way of manufactured interest or manufactured |
| |
| |
(b) | the income tax required to be accounted for and paid in connection |
| 35 |
with the making of the payment, |
| |
| is less than the gross amount of the interest or overseas dividend of which it is |
| |
| |
(2) | For the purpose of giving relief under the Income Tax Acts in a case to which |
| |
section 578 or 581 applies (manufactured interest and manufactured overseas |
| 40 |
dividends), the gross amount of the manufactured interest or manufactured |
| |
overseas dividend is treated as being an amount equal to the sum of the |
| |
amounts mentioned in paragraphs (a) and (b) of subsection (1). |
| |
|
| |
|
| |
|
(3) | Subsection (2) applies despite anything in— |
| |
(a) | sections 578 to 582 (main rules about manufactured interest and |
| |
manufactured overseas dividends), and |
| |
(b) | section 589(3) (meaning of “gross amount” of manufactured overseas |
| |
| 5 |
(4) | In this section “relief” means relief by way of— |
| |
(a) | deduction in calculating profits or gains, or |
| |
(b) | deduction or set off against income. |
| |
585 | Power to deal with other special cases |
| |
(1) | The Treasury may by regulations make provision about— |
| 10 |
(a) | such manufactured dividends, manufactured interest or manufactured |
| |
overseas dividends as may be prescribed, |
| |
(b) | such persons who receive, or become entitled to receive, manufactured |
| |
dividends, manufactured interest or manufactured overseas dividends |
| |
| 15 |
(c) | such payers of manufactured dividends, manufactured interest or |
| |
manufactured overseas dividends as may be prescribed. |
| |
(2) | The provision which may be made is for any prescribed manufactured |
| |
dividend, manufactured interest, manufactured overseas dividend or person |
| |
to be treated, in prescribed circumstances, otherwise than as mentioned in— |
| 20 |
(a) | sections 572 to 582 (main rules about manufactured payments), or |
| |
(b) | Chapter 9 of Part 14 (deduction of income tax at source: manufactured |
| |
| |
| for any prescribed income tax purposes. |
| |
General regulation-making powers |
| 25 |
586 | Powers about administrative provisions |
| |
(1) | The Treasury may by regulations make provision about— |
| |
(a) | the accounts and other records which are to be kept, |
| |
(b) | the vouchers which are to be issued or produced, |
| |
(c) | the returns which are to be made, and |
| 30 |
(d) | the manner in which amounts required to be deducted, or accounted |
| |
for and paid, on account of income tax as a result of this Chapter or |
| |
Chapter 9 of Part 14 are to be accounted for and paid, |
| |
| by payers or recipients of manufactured dividends, manufactured interest or |
| |
manufactured overseas dividends. |
| 35 |
(2) | Regulations under this Chapter or Chapter 9 of Part 14 about any liability to |
| |
account for income tax may contain any of the following— |
| |
(a) | provision for calculating the amounts to be accounted for, |
| |
(b) | provision, in relation to deciding the amount to be paid on any |
| |
occasion, for setting other amounts against the amounts to be |
| 40 |
| |
(c) | provision as to the liabilities against which amounts accounted for are, |
| |
or are not, to be set for income tax purposes or corporation tax |
| |
| |
|
| |
|
| |
|
(d) | provision modifying, or applying (with or without modifications), any |
| |
enactments contained in the Tax Acts. |
| |
(3) | The Treasury may by regulations provide for prescribed provisions of TMA |
| |
1970 to apply for income tax purposes in relation to— |
| |
(a) | manufactured dividends, |
| 5 |
(b) | manufactured interest, or |
| |
(c) | manufactured overseas dividends, |
| |
| with such modifications, specified in the regulations, as the Treasury consider |
| |
| |
(4) | The Treasury may by regulations make further provision about the |
| 10 |
administration, assessment, collection and recovery of amounts required to be |
| |
deducted, or accounted for and paid, on account of income tax as a result of— |
| |
| |
(b) | Chapter 9 of Part 14. |
| |
587 | Power for manufactured payments to be eligible for relief |
| 15 |
(1) | The Treasury may by regulations provide for any— |
| |
(a) | manufactured dividend, |
| |
(b) | manufactured interest, or |
| |
(c) | manufactured overseas dividend, |
| |
| paid to any person to be treated, in such circumstances and to such extent as |
| 20 |
may be prescribed in the regulations, as exempt pension income of the |
| |
| |
(2) | “Exempt pension income” means income which is eligible for relief from |
| |
income tax as a result of section 613(4) or 614(2), (3) or (4) of ICTA or section |
| |
186 of FA 2004 (exemptions about pensions and annuities). |
| 25 |
588 | Regulation-making powers: general |
| |
Regulations under this Chapter may make different provision for different |
| |
| |
| |
589 | Meaning of “gross amount”: interest and manufactured overseas dividends |
| 30 |
(1) | This section applies for the purposes of this Chapter. |
| |
(2) | The gross amount of any interest or payment is the amount of the interest or |
| |
payment before the making of any deduction of income tax that is required to |
| |
be deducted from it on its being paid or made. |
| |
(3) | The gross amount of a manufactured overseas dividend is an amount equal to |
| 35 |
the gross amount of the overseas dividend of which the manufactured |
| |
overseas dividend is representative. |
| |
(4) | The gross amount of an overseas dividend is the sum of— |
| |
(a) | so much of the overseas dividend as remains after the deduction of any |
| |
overseas tax chargeable on it, |
| 40 |
(b) | the amount of any overseas tax so deducted, and |
| |
|
| |
|
| |
|
(c) | the amount of any overseas tax credit in respect of the overseas |
| |
| |
590 | Meaning of “relevant withholding tax” |
| |
(1) | This section applies for the purposes of this Chapter. |
| |
(2) | “Relevant withholding tax”, in relation to the gross amount of a manufactured |
| 5 |
overseas dividend, means an amount of income tax representative of the sum |
| |
| |
(a) | any amount that would have been deducted by way of overseas tax |
| |
from an overseas dividend on the overseas securities of the same gross |
| |
amount as the manufactured overseas dividend, and |
| 10 |
(b) | the amount of any overseas tax credit in respect of such an overseas |
| |
| |
(3) | The Treasury may by regulations make provision about the rates of relevant |
| |
withholding tax which are to apply in relation to manufactured overseas |
| |
dividends in relation to different overseas territories. |
| 15 |
(4) | The Treasury must, in prescribing these rates, have regard to— |
| |
(a) | the rates at which overseas tax would have fallen to be deducted, and |
| |
(b) | the rates of overseas tax credits, |
| |
| in overseas territories, or in the particular overseas territory, in respect of |
| |
payments of overseas dividends on overseas securities. |
| 20 |
591 | Interpretation of other terms used in Chapter |
| |
| |
“C (tax-exempt)” has the meaning given by section 105(3) of FA 2006, |
| |
“G (property rental business)” has the meaning given by paragraph 2 of |
| |
| 25 |
“group” and “principal company” have the meanings given by section 134 |
| |
| |
“overseas tax” means tax under the law of a territory outside the United |
| |
| |
“overseas tax credit” means any credit under the law of a territory outside |
| 30 |
the United Kingdom in respect of overseas tax which corresponds to a |
| |
| |
“prescribed” means prescribed in regulations under this Chapter, and |
| |
“transfer” includes a sale or other disposal. |
| |
(2) | References in this Chapter to a trade carried on through a branch or agency are |
| 35 |
to be read, in relation to a company, as references to a trade carried on through |
| |
a permanent establishment. |
| |
|
| |
|
| |
|
| |
Tax credits: stock lending arrangements and repos |
| |
Stock lending arrangements |
| |
592 | No tax credits for borrower under stock lending arrangement |
| |
(1) | This section applies if— |
| 5 |
(a) | there is a stock lending arrangement in respect of UK shares, |
| |
(b) | a qualifying distribution is made to the person who is the borrower |
| |
| |
(c) | the qualifying distribution is, or is a payment representative of, a |
| |
dividend in respect of the UK shares, and |
| 10 |
(d) | a manufactured dividend representative of the dividend is paid by the |
| |
borrower in respect of any UK shares in respect of which the |
| |
| |
(2) | The borrower is not entitled to a tax credit under section 397(1) of ITTOIA 2005 |
| |
(tax credits for qualifying distributions) in respect of the distribution. |
| 15 |
(3) | If the borrower is UK resident, section 399(2) of ITTOIA 2005 (recipients of |
| |
qualifying distributions treated as having paid income tax at dividend |
| |
ordinary rate on them) does not apply in respect of the distribution. |
| |
| |
593 | No tax credits for interim holder under repo |
| 20 |
(1) | This section applies if— |
| |
(a) | there is a repo in respect of UK shares, |
| |
(b) | under the repo, the original owner has transferred the UK shares to the |
| |
| |
(c) | a qualifying distribution is made to the interim holder, |
| 25 |
(d) | the qualifying distribution is, or is a payment representative of, a |
| |
dividend in respect of the UK shares, and |
| |
(e) | a manufactured dividend representative of the dividend is paid by the |
| |
interim holder in respect of any UK shares in respect of which the repo |
| |
| 30 |
(2) | The interim holder is not entitled to a tax credit under section 397(1) of ITTOIA |
| |
2005 (tax credits for qualifying distributions) in respect of the distribution. |
| |
(3) | If the interim holder is UK resident, section 399(2) of ITTOIA 2005 (recipients |
| |
of qualifying distributions treated as having paid income tax at dividend |
| |
ordinary rate on them) does not apply in respect of the distribution. |
| 35 |
594 | No tax credits for original owner under repo |
| |
(1) | This section applies if— |
| |
(a) | there is a repo in respect of UK shares, |
| |
(b) | under the repo, the original owner has transferred the UK shares to the |
| |
| 40 |
|
| |
|
| |
|
(c) | a qualifying distribution is made, |
| |
(d) | the qualifying distribution is a manufactured dividend paid under the |
| |
repo in respect of the UK shares by the interim holder to the original |
| |
| |
(e) | the repo is not such that the actual dividend which the manufactured |
| 5 |
dividend represents is receivable by a person other than the original |
| |
| |
(2) | The original owner is not entitled to a tax credit under section 397(1) of ITTOIA |
| |
2005 (tax credits for qualifying distributions) in respect of the distribution. |
| |
(3) | If the original owner is UK resident, section 399(2) of ITTOIA 2005 (recipients |
| 10 |
of qualifying distributions treated as having paid income tax at dividend |
| |
ordinary rate on them) does not apply in respect of the distribution. |
| |
| |
595 | Meaning of “manufactured dividend” |
| |
In this Chapter “manufactured dividend” has the same meaning as in Chapter |
| 15 |
2 (see section 573(1)(a)). |
| |
| |
Deemed manufactured payments |
| |
Stock lending arrangements |
| |
596 | Deemed manufactured payments: stock lending arrangements |
| 20 |
(1) | This section applies if— |
| |
(a) | there is a stock lending arrangement in respect of securities, |
| |
(b) | a dividend or interest on the securities is paid, as a result of the |
| |
arrangement, to a person other than the person who is the lender under |
| |
| 25 |
(c) | no provision is made for securing that the lender receives payments |
| |
representative of the dividend or interest. |
| |
(2) | The rules about manufactured payments apply as if the person who is the |
| |
borrower under the arrangement— |
| |
(a) | were required, under the arrangement, to pay the lender an amount |
| 30 |
representative of the dividend or interest, and |
| |
(b) | discharged the requirement when the dividend or interest was paid. |
| |
(3) | But the borrower is not entitled (whether as a result of the rules about |
| |
manufactured payments or otherwise) to an income deduction in respect of the |
| |
deemed requirement to pay or the deemed payment. |
| 35 |
(4) | “Income deduction” means— |
| |
(a) | a deduction in calculating profits or gains for income tax purposes, or |
| |
(b) | a deduction in calculating net income. |
| |
(5) | For the purposes of this section, a quasi-stock lending arrangement is treated |
| |
as if it were a stock lending arrangement. |
| 40 |
|
| |
|