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Income Tax Bill


Income Tax Bill
Part 11 — Manufactured payments and repos
Chapter 2 — Manufactured payments

300

 

dividend to which section 121 of FA 2006 applied (distributions treated as UK

property business profits).

(4)   

This section is subject to—

(a)   

section 583 (manufactured payments exceeding underlying payments),

and

5

(b)   

section 585 (power to deal with other special cases).

577     

Statements about manufactured dividends

(1)   

Subsections (3) to (7) apply to a person who—

(a)   

pays a manufactured dividend as mentioned in section 573(1), and

(b)   

is not within the charge to corporation tax.

10

(2)   

But those subsections do not apply so far as the manufactured dividend is

representative of a dividend which is—

(a)   

paid by a company to which Part 4 of FA 2006 applies (Real Estate

Investment Trusts) in respect of profits of C (tax-exempt), or

(b)   

paid by the principal company of a group to which that Part applies in

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respect of profits of G (property rental business).

(3)   

The person must, at the same time as paying the manufactured dividend, give

the recipient a statement.

(4)   

The statement must set out—

(a)   

the amount of the manufactured dividend,

20

(b)   

the date of its payment, and

(c)   

the amount of associated tax credit.

(5)   

The statement must be in writing.

(6)   

The amount of associated tax credit is the amount of tax credit to which the

recipient, or a person claiming title through or under the recipient—

25

(a)   

is entitled in respect of the manufactured dividend as a result of section

573(2) of this Act or paragraph 2(3)(b) of Schedule 23A to ICTA

(manufactured dividend treated as dividend), or

(b)   

would be so entitled if all the conditions for a tax credit had been met

in the case of the deemed dividend and the recipient or that person.

30

(7)   

The duty under subsection (3) to give a statement is enforceable by the

recipient.

(8)   

For provisions corresponding to subsections (3) to (7) which apply if the payer

of a manufactured dividend is within the charge to corporation tax see—

(a)   

section 234A of ICTA (by virtue of paragraph 2(2)(b) of Schedule 23A

35

to ICTA), if the payer is a UK resident company, and

(b)   

paragraph 2(6) to (8) of Schedule 23A to ICTA, if the payer is a non-UK

resident company within the charge to corporation tax.

(9)   

For a power for regulations to make provision corresponding to subsections (3)

to (7) for a case within subsection (2), see section 973 as applied by section

40

918(3) (and in particular section 974(1)(k)).

 
 

Income Tax Bill
Part 11 — Manufactured payments and repos
Chapter 2 — Manufactured payments

301

 

Manufactured interest on UK securities

578     

Manufactured interest on UK securities

(1)   

This section applies if a person—

(a)   

pays another person an amount (“manufactured interest”) which is

representative of a periodical payment of interest on UK securities, and

5

(b)   

does so under a requirement of an arrangement between them for the

transfer of the securities.

(2)   

The Income Tax Acts apply in relation to the recipient, and persons claiming

title through or under the recipient, as if—

(a)   

the manufactured interest were a periodical payment of interest on the

10

securities, and

(b)   

the gross amount of the deemed interest payment were equal to the

gross amount of the interest of which the manufactured interest is

representative.

(3)   

If the payer is UK resident, or a person acting in the course of a trade carried

15

on in the United Kingdom through a branch or agency, the Income Tax Acts

apply in relation to the payer subject to sections 579 and 580 (allowable

deductions).

(4)   

See also—

section 919 (manufactured interest payments by UK residents etc:

20

deduction of income tax at source), and

section 920 (foreign payers of manufactured interest: the reverse charge).

(5)   

This section is subject to—

section 583 (manufactured payments exceeding underlying payments),

section 584 (manufactured payments less than underlying payments), and

25

section 585 (power to deal with other special cases).

579     

Allowable deductions: matching

(1)   

This section applies to a person who pays manufactured interest as mentioned

in section 578(1).

(2)   

The gross amount of the manufactured interest is allowable for income tax

30

purposes as a deduction in calculating the net income of the payer (see Step 2

of the calculation in section 23).

   

This is subject to subsection (3).

(3)   

It is allowable only so far as—

(a)   

it is not otherwise deductible, and

35

(b)   

it falls within subsection (4), (6) or (7).

(4)   

An amount falls within this subsection so far as the payer—

(a)   

receives either the periodical payment of interest which is represented

by the manufactured interest or a payment which is representative of

the periodical payment of interest, and

40

(b)   

is chargeable to income tax on the payment received.

(5)   

See section 679 (interest on securities involving accrued income losses: general)

for the amount chargeable to income tax in a case where that section applies.

 
 

Income Tax Bill
Part 11 — Manufactured payments and repos
Chapter 2 — Manufactured payments

302

 

(6)   

An amount falls within this subsection so far as—

(a)   

the payer is, by virtue of Chapter 2 of Part 12 (accrued income profits),

chargeable to income tax on qualifying accrued income profits in

respect of transfers of securities, and

(b)   

the transfers are subject to the arrangement giving rise to the payment

5

of manufactured interest.

(7)   

An amount falls within this subsection so far as the payer—

(a)   

is treated under section 607 (treatment of price differences under repos)

as receiving a payment of interest in respect of the securities, and

(b)   

is chargeable to income tax on the payment.

10

(8)   

See section 580 for a further qualification to the rule in subsection (2).

(9)   

For the purposes of subsection (3)(a) an amount is deductible if it is—

(a)   

deductible in calculating any of the payer’s profits or gains for income

tax purposes, or

(b)   

deductible for those purposes in calculating the net income of the

15

payer.

(10)   

In this section “qualifying accrued income profits” means accrued income

profits which are treated as made—

(a)   

under section 628(5), or

(b)   

under section 630(2) in respect of a transfer of variable rate securities.

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580     

Allowable deductions: restriction on double counting

(1)   

This section applies if an amount has been allowed as a deduction under

section 579(2) by reference to the whole or part of—

(a)   

the periodical payment of interest, or other payment, mentioned in

section 579(4)(a),

25

(b)   

the sum mentioned in section 579(6)(a), or

(c)   

the deemed payment of interest mentioned in section 579(7)(a).

(2)   

No further deduction is allowable by reference to all or part of the matched

portion of the payment, sum or deemed payment.

(3)   

The “matched portion” of the payment, sum or deemed payment means—

30

(a)   

the whole of it, if the amount has been allowed as a deduction by

reference to the whole of it, or

(b)   

the part of it by reference to which the amount has been allowed as a

deduction, in any other case.

Manufactured overseas dividends

35

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

overseas dividend on overseas securities,

40

(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.

 
 

Income Tax Bill
Part 11 — Manufactured payments and repos
Chapter 2 — Manufactured payments

303

 

(2)   

The condition is that—

(a)   

in a case within section 922(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 923(1) (foreign payers of manufactured

5

overseas dividends: the reverse charge), the amount of income tax

required to be accounted for and paid as a result of that section has been

accounted for and paid.

(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

10

purposes.

(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

15

amount deducted as a result of section 922 or (as the case may be)

accounted for and paid as a result of section 923.

(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

account of income tax.

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(6)   

In this section “relevant income tax purposes” means the purposes of the

Income Tax Acts as they apply in relation to—

(a)   

UK residents, and

(b)   

persons carrying on business through a branch or agency in the United

Kingdom.

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582     

Powers about manufactured overseas dividends

(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

section 581(1), or

30

(b)   

is treated as doing so for any purposes of this Chapter or regulations

made under it.

(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

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provision which has effect under the law of a territory outside the United

Kingdom.

(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

transaction.

40

(5)   

A “relevant transaction” is a sale, repurchase or other transfer of the overseas

securities to which the manufactured overseas dividend relates.

 
 

 
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