Corporation Tax Bill

House of Commons

Session 2009 - 10
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Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 17 — Manufactured payments and repos
Chapter 4 — Further provision about manufactured payments
398

(a)
section 797 (manufactured overseas dividends: amounts exceeding
underlying payments), and
(b)
section 798 (manufactured overseas dividends less than underlying
payments).
795
Exemption of manufactured overseas dividends
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(1)
Part 9A of CTA 2009 (company distributions), in its application in relation to a
manufactured overseas dividend as a result of section 792 or 794, has effect—
(a)
as if the manufactured overseas dividend were an overseas dividend
on the overseas securities in question, and
(b)
with the following modification.
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(2)
The modification is that—
(a)
references in that Part to the payer are to be treated as references to the
company that pays the dividend of which the manufactured overseas
dividend is representative, and
(b)
the definition of “the payer” in section 931T is to be treated as omitted.
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Chapter 4
Further provision about manufactured payments
Manufactured payments exceeding, or less than, underlying payments
796
Manufactured dividends: amounts exceeding underlying payments
(1)
This section applies if an amount paid by way of manufactured dividend
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would otherwise exceed the amount of the 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 Chapter 2 and this Chapter as not made under the requirement
mentioned in section 782(b) (meaning of “manufactured dividend”).
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(3)
Instead it is treated, to that extent, for all purposes of the Corporation Tax Acts
as a separate fee for entering into the arrangement under which it was made.
797
Manufactured overseas dividends: amounts exceeding underlying payments
(1)
This section applies if the sum of—
(a)
an amount paid by way of manufactured overseas dividend, and
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(b)
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 overseas dividend of which it
is representative.
(2)
The payment, to the extent of an amount equal to the excess, is treated for the
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purposes of Chapter 3 and this Chapter as not made under the requirement
mentioned in section 790(b) (meaning of “manufactured overseas dividend”).
(3)
Instead it is treated, to that extent, for all purposes of the Corporation Tax Acts
as a separate fee for entering into the arrangement under which it was made.

Corporation Tax Bill
Part 17 — Manufactured payments and repos
Chapter 4 — Further provision about manufactured payments
399

(4)
But subsection (3) does not apply so far as Part 5 of CTA 2009 (loan
relationships) applies to the amount as if it were interest under a loan
relationship as a result of section 540 of that Act.
798
Manufactured overseas dividends less than underlying payments
(1)
This section applies if the sum of—
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(a)
an amount paid by way of manufactured 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 overseas dividend of which it is
representative.
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(2)
For the purpose of giving relief under the Corporation Tax Acts in a case to
which section 792 or 794 applies (manufactured overseas dividends: treatment
of recipient), the gross amount of the manufactured overseas dividend is not
the amount specified in section 813(2).
(3)
Instead it is treated as being an amount equal to the sum of the amounts
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mentioned in paragraphs (a) and (b) of subsection (1).
(4)
In this section “relief” means relief by way of—
(a)
deduction in calculating profits or gains, or
(b)
deduction from total profits.
Manufactured payments under arrangements with unallowable purpose
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799
Manufactured payments under arrangements with unallowable purpose
(1)
This section applies if—
(a)
a manufactured payment falls to be made by a company in an
accounting period in pursuance of any arrangements,
(b)
the arrangements have an unallowable purpose at any time (see section
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800),
(c)
any of the manufactured payment is attributable to the unallowable
purpose, and
(d)
the company is not subject to another relevant tax relief restriction.
(2)
The company is not entitled (whether as a result of any provision made in or
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under this Chapter, or otherwise), to any relevant tax relief, so far as the relief
is in respect of, or referable to, so much of the manufactured payment as is
attributable to the unallowable purpose.
(3)
In this section “relevant tax relief” means—
(a)
a deduction in calculating profits or gains for the purposes of
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corporation tax,
(b)
a deduction from total profits,
(c)
the bringing into account of any debit for the purposes of Part 5 of CTA
2009 (loan relationships), or
(d)
the surrender of an amount by way of group relief.
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(4)
For the purposes of this section a company is subject to another relevant tax
relief restriction if it is not entitled to a relevant tax relief in respect of, or

Corporation Tax Bill
Part 17 — Manufactured payments and repos
Chapter 4 — Further provision about manufactured payments
400

referable to, the whole or any part of the manufactured payment as a result of
any of the provisions specified in subsection (5).
(5)
The provisions are—
(a)
section 76(4)(d) of ICTA (expenses of insurance companies:
unallowable purposes),
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(b)
section 441 of CTA 2009 (loan relationships with unallowable
purposes), and
(c)
section 1219(2)(b) of CTA 2009 (expenses of management of company’s
investment business: unallowable purpose).
(6)
How far the manufactured payment is attributable to the unallowable purpose
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must be determined by just and reasonable apportionment.
(7)
For the meaning of “arrangements” see section 801(1).
800
Arrangements with an unallowable purpose
(1)
This section applies for the purposes of section 799.
(2)
Arrangements have an unallowable purpose at any time if at that time the
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purposes for which the company is a party to them include a purpose that is
not among the business or other commercial purposes of the company.
(3)
Arrangements also have an unallowable purpose at any time if at that time
such a purpose is the only purpose, or one of the purposes, for which the
company is a party to—
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(a)
any related transaction, or
(b)
any transaction in pursuance of the arrangements.
(4)
In section 799 “the unallowable purpose” in relation to any arrangements
means such a purpose.
(5)
The business and other commercial purposes of a company only include the
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purposes of any part of its activities in respect of which it is within the charge
to corporation tax.
(6)
Subsection (7) applies if a tax avoidance purpose is one of the purposes for
which a company is at any time a party to—
(a)
any arrangements,
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(b)
any related transaction in the case of any arrangements, or
(c)
any transaction in pursuance of any arrangements.
(7)
The tax avoidance purpose is taken to be a business or other commercial
purpose of the company only if it is not the main purpose, or one of the main
purposes, for which the company is party to the arrangements or transaction
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at that time.
(8)
In this section “tax avoidance purpose” means any purpose that consists in
securing a tax advantage for the company in question or any other person.
(9)
Section 1139 (“tax advantage”) applies for the purposes of this section.
(10)
For the meaning of other expressions used in this section, see section 801.
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Corporation Tax Bill
Part 17 — Manufactured payments and repos
Chapter 4 — Further provision about manufactured payments
401

801
Sections 799 and 800: supplementary
(1)
For the purposes of sections 799 and 800 and this section—
(a)
“arrangements” includes schemes, arrangements and understandings
(whether or not they are legally enforceable), and
(b)
“manufactured payment” means—
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(i)
any manufactured dividend,
(ii)
any manufactured interest (as defined in section 539(5) of CTA
2009),
(iii)
any manufactured overseas dividend, and
(iv)
any payment which, as a result of section 796(3) or 797(3),
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constitutes a fee.
(2)
For the purposes of section 800, one or more transactions are treated as related
transactions, in the case of any arrangements, if it would be reasonable to
assume, from—
(a)
the likely effect of the transactions,
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(b)
the circumstances in which the transactions are entered into or effected,
or
(c)
both that effect and those circumstances,

that none of the transactions would have been entered into or effected
independently of the arrangements.
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(3)
Transactions may be related transactions, in the case of any arrangements,
even if the transactions—
(a)
are not between the same parties, or
(b)
are not between the parties to the arrangements.
Miscellaneous
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802
Powers about amounts representative of 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 an amount representative of an overseas dividend, or
(b)
is treated as doing so for any purposes of this Chapter or Chapter 3, or
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of regulations made under this Chapter.
(2)
The regulations may provide for removing or reducing any right of the person
to claim relief under Part 2 of TIOPA 2010 (double taxation relief).
(3)
The regulations may provide for adjusting a relevant amount by reference to a
provision that has effect under the law of a territory outside the United
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Kingdom.
(4)
A “relevant amount” is an amount which is treated for prescribed purposes of
the Corporation Tax Acts as the amount paid or payable to a person in respect
of a relevant transaction.
(5)
A “relevant transaction” is a sale, repurchase or other transfer of the overseas
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securities to which the amount mentioned in subsection (1)(a) relates.