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Income Tax Bill


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

304

 

Special cases

583     

Manufactured payments exceeding underlying payments

(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

5

(b)   

the sum of—

(i)   

an amount paid by way of manufactured interest or

manufactured overseas dividend, and

(ii)   

the income tax required to be accounted for and paid in

connection with the making of the payment,

10

   

would otherwise exceed the gross amount of the interest or overseas

dividend of which it is representative.

(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 15 as not made under the

requirement mentioned in section 573(1)(b), 578(1)(b) or 581(1)(b) (criteria for

15

application of provisions about manufactured payments).

(3)   

Instead it is treated, to that extent, for income tax purposes as a separate fee for

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

20

(b)   

Chapter 9 of Part 15 (deduction of income tax at source: manufactured

payments).

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

25

overseas dividend, and

(b)   

the income tax required to be accounted for and paid in connection

with the making of the payment,

   

is less than the gross amount of the interest or overseas dividend of which it is

representative.

30

(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

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).

35

(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

dividend).

40

(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.

 
 

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

305

 

585     

Power to deal with other special cases

(1)   

The Treasury may by regulations make provision about—

(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

5

dividends, manufactured interest or manufactured overseas dividends

as may be prescribed, or

(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

10

dividend, manufactured interest, manufactured overseas dividend or person

to be treated, in prescribed circumstances, otherwise than as mentioned in—

(a)   

sections 572 to 582 (main rules about manufactured payments), or

(b)   

Chapter 9 of Part 15 (deduction of income tax at source: manufactured

payments),

15

   

for any prescribed income tax purposes.

General regulation-making powers

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,

20

(b)   

the vouchers which are to be issued or produced,

(c)   

the returns which are to be made, and

(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 15 are to be accounted for and paid,

25

   

by payers or recipients of manufactured dividends, manufactured interest or

manufactured overseas dividends.

(2)   

Regulations under this Chapter or Chapter 9 of Part 15 about any liability to

account for income tax may contain any of the following—

(a)   

provision for calculating the amounts to be accounted for,

30

(b)   

provision, in relation to deciding the amount to be paid on any

occasion, for setting other amounts against the amounts to be

accounted for,

(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

35

purposes,

(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—

40

(a)   

manufactured dividends,

(b)   

manufactured interest, or

(c)   

manufactured overseas dividends,

   

with such modifications, specified in the regulations, as the Treasury consider

appropriate.

45

 
 

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

306

 

(4)   

The Treasury may by regulations make further provision about the

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—

(a)   

this Chapter, or

(b)   

Chapter 9 of Part 15.

5

587     

Power for manufactured payments to be eligible for relief

(1)   

The Treasury may by regulations provide for any—

(a)   

manufactured dividend,

(b)   

manufactured interest, or

(c)   

manufactured overseas dividend,

10

   

paid to any person to be treated, in such circumstances and to such extent as

may be prescribed in the regulations, as exempt pension income of the

recipient.

(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

15

186 of FA 2004 (exemptions about pensions and annuities).

588     

Regulation-making powers: general

Regulations under this Chapter may make different provision for different

cases.

Interpretation

20

589     

Meaning of “gross amount”: interest and manufactured overseas dividends

(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.

25

(3)   

The gross amount of a manufactured overseas dividend is an amount equal to

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

30

overseas tax chargeable on it,

(b)   

the amount of any overseas tax so deducted, and

(c)   

the amount of any overseas tax credit in respect of the overseas

dividend.

590     

Meaning of “relevant withholding tax”

35

(1)   

This section applies for the purposes of this Chapter.

(2)   

“Relevant withholding tax”, in relation to the gross amount of a manufactured

overseas dividend, means an amount of income tax representative of the sum

of—

 
 

Income Tax Bill
Part 11 — Manufactured payments and repos
Chapter 3 — Tax credits: stock lending arrangements and repos

307

 

(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

(b)   

the amount of any overseas tax credit in respect of such an overseas

dividend.

5

(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.

(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

10

(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.

591     

Interpretation of other terms used in Chapter

(1)   

In this Chapter—

15

“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

Schedule 17 to FA 2006,

“group” and “principal company” have the meanings given by section 134

of FA 2006,

20

“overseas tax” means tax under the law of a territory outside the United

Kingdom,

“overseas tax credit” means any credit under the law of a territory outside

the United Kingdom in respect of overseas tax which corresponds to a

tax credit,

25

“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

to be read, in relation to a company, as references to a trade carried on through

a permanent establishment.

30

Chapter 3

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—

35

(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

under the arrangement,

(c)   

the qualifying distribution is, or is a payment representative of, a

dividend in respect of the UK shares, and

40

 
 

Income Tax Bill
Part 11 — Manufactured payments and repos
Chapter 3 — Tax credits: stock lending arrangements and repos

308

 

(d)   

a manufactured dividend representative of the dividend is paid by the

borrower in respect of any UK shares in respect of which the

arrangement is made.

(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.

5

(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.

Repos

593     

No tax credits for interim holder under repo

10

(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

interim holder,

(c)   

a qualifying distribution is made to the interim holder,

15

(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

is made.

20

(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.

25

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

interim holder,

30

(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

owner, and

(e)   

the repo is not such that the actual dividend which the manufactured

35

dividend represents is receivable by a person other than the original

owner.

(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

40

of qualifying distributions treated as having paid income tax at dividend

ordinary rate on them) does not apply in respect of the distribution.

 
 

 
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