Corporation Tax Bill

House of Commons

Session 2009 - 10
Internet Publications
Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 17 — Manufactured payments and repos
Chapter 5 — Stock lending arrangements and repos
402

803
Power to deal with special cases
(1)
The Treasury may by regulations make provision about—
(a)
such manufactured dividends or manufactured overseas dividends as
may be prescribed,
(b)
such persons who receive, or become entitled to receive, manufactured
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dividends or manufactured overseas dividends as may be prescribed,
or
(c)
such payers of manufactured dividends or manufactured overseas
dividends as may be prescribed.
(2)
The provision which may be made is for any prescribed manufactured
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dividend, manufactured overseas dividend or person to be treated, in
prescribed circumstances, otherwise than as mentioned in any of sections 783
to 788, 791, 792, 794 and 795 (rules about manufactured dividends and
manufactured overseas dividends), for any prescribed purposes of the
Corporation Tax Acts.
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804
Regulation-making powers: general
(1)
Regulations made under Chapter 2 or this Chapter may make different
provision for different cases.
(2)
In this Chapter “prescribed” means prescribed in regulations under this
Chapter.
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Chapter 5
Stock lending arrangements and repos
Interpretation
805
“Stock lending arrangement”
(1)
For the purposes of this Chapter there is a stock lending arrangement in respect
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of securities if—
(a)
a person (“the lender”) has transferred the securities to another person
(“the borrower”) otherwise than by way of sale,
(b)
the securities are UK shares, UK securities or overseas securities,
(c)
the transfer is under an arrangement between the lender and the
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borrower, and
(d)
under the arrangement, the borrower is required to transfer the
securities back to the lender otherwise than by way of sale.
(2)
The reference in subsection (1)(d) to the transfer of the securities back to the
lender includes a reference to—
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(a)
a transfer within subsection (3), and
(b)
a payment within subsection (5).
(3)
A transfer is within this subsection if it is a transfer to the lender of securities
of the same description as the securities—
(a)
in accordance with a requirement to do so, or
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(b)
in exercise of a power to substitute securities of the same description for
the securities that are required to be transferred back.

Corporation Tax Bill
Part 17 — Manufactured payments and repos
Chapter 5 — Stock lending arrangements and repos
403

(4)
For the purposes of subsection (3), securities are taken to be of the same
description as other securities if (and only if) they—
(a)
are in the same quantities,
(b)
give the same rights against the same persons, and
(c)
are of the same type and nominal value,
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as the other securities.
(5)
A payment is within this subsection if it is a payment to the lender, in
pursuance of a redemption obligation, of an amount equal to the amount of the
entitlement under the redemption obligation.
(6)
A redemption obligation is an obligation that arises on a person’s becoming
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entitled to receive an amount in respect of the redemption of the securities.
806
Section 805: supplementary
(1)
In section 805 “UK securities” means securities of—
(a)
the government of the United Kingdom,
(b)
a local authority in the United Kingdom,
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(c)
another public authority in the United Kingdom, or
(d)
a UK resident company or other UK resident body.
(2)
But in that section “UK securities” does not include UK shares.
(3)
In subsection (1) “securities” includes loan stock or any similar security.
807
“Creditor repo”, “creditor quasi-repo”, “debtor repo” and “debtor quasi-
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repo”
In this Chapter each of the following expressions has the same meaning as in
Chapter 10 of Part 6 of CTA 2009—
“creditor repo” (see section 543 of that Act),
“creditor quasi-repo” (see section 544 of that Act),
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“debtor repo” (see section 548 of that Act),
“debtor quasi-repo” (see section 549 of that Act).
Tax credits: stock lending arrangements and repos
808
No tax credits for borrower under stock lending arrangement
(1)
This section applies if—
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(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
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(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 1109 (tax credits for
certain recipients of exempt qualifying distributions) in respect of the
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distribution.

Corporation Tax Bill
Part 17 — Manufactured payments and repos
Chapter 5 — Stock lending arrangements and repos
404

809
No tax credits for lender under creditor repo or creditor quasi-repo
(1)
This section applies if—
(a)
there is a creditor repo or creditor quasi-repo in respect of UK shares,
(b)
a qualifying distribution is made to the lender under the repo or quasi-
repo,
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(c)
the qualifying distribution is, or is a payment representative of, a
dividend in respect of the UK shares, and
(d)
a manufactured dividend representative of the dividend is paid by the
lender under the repo or quasi-repo in respect of any UK shares to
which the repo or quasi-repo relates.
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(2)
The lender under the repo or quasi-repo is not entitled to a tax credit under
section 1109 (tax credits for certain recipients of exempt qualifying
distributions) in respect of the distribution.
(3)
For the purposes of this section a person is taken to have paid a manufactured
dividend representative of a dividend in respect of UK shares to which a
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creditor repo relates if—
(a)
the person is treated for the purposes of Chapter 9 of Part 15 of ITA 2007
(deduction of income tax at source: manufactured payments) as
making a payment which is representative of the income payable on the
shares, and
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(b)
the person is so treated as a result of section 925A(2) of ITA 2007
(requirements to deduct tax from manufactured payments: creditor
repos).
810
No tax credits for borrower under debtor repo or debtor quasi-repo
(1)
This section applies if—
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(a)
there is a debtor repo or debtor quasi-repo in respect of UK shares,
(b)
a qualifying distribution is made,
(c)
the qualifying distribution is a manufactured dividend paid to the
borrower under the repo or quasi-repo in respect of the UK shares as a
result of the repo or quasi-repo, and
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(d)
the arrangements in relation to the repo or quasi-repo are such that the
actual dividend which the manufactured dividend represents is
receivable by the borrower under the repo or quasi-repo.
(2)
The borrower under the repo is not entitled to a tax credit under section 1109
(tax credits for certain recipients of qualifying distributions) in respect of the
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distribution.
811
Arrangements between companies to make distributions
(1)
This section applies if two or more companies enter into arrangements to make
distributions to each other’s members.
(2)
For the purposes of sections 808 to 810 all the parties concerned (however
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many) may be treated as if anything done by any one of those companies had
been done by any one of the others.

Corporation Tax Bill
Part 17 — Manufactured payments and repos
Chapter 6 — Interpretation of Part
405

Deemed manufactured payments
812
Deemed manufactured payments: stock lending arrangements
(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
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arrangement, to a person other than the person who is the lender under
the arrangement, and
(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 for corporation tax purposes as
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if the person who is the borrower under the arrangement—
(a)
were required, under the arrangement, to pay the lender an amount
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
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manufactured payments or otherwise) to—
(a)
a deduction in calculating profits or gains for corporation tax purposes,
or
(b)
a deduction from total profits,

in respect of the deemed requirement to pay or the deemed payment.
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(4)
In any case where section 792 (company receiving manufactured overseas
dividend from UK resident etc) applies as a result of subsection (2), it has effect
with the omission of—
(a)
paragraph (b) of subsection (3) (and the “but” immediately before that
paragraph), and
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(b)
subsection (4) (and the references to that subsection in subsections (2)
and (5)).
(5)
In any case where section 794 (company receiving manufactured overseas
dividend from foreign payer) applies as a result of subsection (2), it has effect
with the omission of—
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(a)
paragraph (b) of subsection (3) (and the “but” immediately before that
paragraph), and
(b)
subsection (4) (and the references to that subsection in subsections (2)
and (5)).
(6)
“The rules about manufactured payments” means—
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(a)
Chapters 2 to 4 and regulations made under Chapter 2 or 4,
(b)
sections 808 to 810, and
(c)
Chapter 9 of Part 6 of CTA 2009 (manufactured interest etc).
Chapter 6
Interpretation of Part
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813
The gross amount of a manufactured overseas dividend etc
(1)
This section applies for the purposes of this Part.

Corporation Tax Bill
Part 18 — Transactions in land
406

(2)
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.
(3)
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
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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.
(4)
For the purposes of this section, a credit is an overseas tax credit if it—
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(a)
is a credit under the law of a territory outside the United Kingdom in
respect of overseas tax, and
(b)
corresponds to a tax credit.
814
Other interpretation
(1)
This section applies for the purposes of this Part.
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(2)
“Overseas dividend” means any interest, dividend or other annual payment
payable in respect of overseas securities.
(3)
“Overseas securities” means shares, stock or other securities issued by—
(a)
a government, local authority or other public authority of a territory
outside the United Kingdom, or
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(b)
another non-UK resident body of persons.
(4)
“Overseas tax” means tax under the law of a territory outside the United
Kingdom.
(5)
“UK shares” means shares in a UK resident company.
(6)
In this section “securities” includes loan stock or any similar security.
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Part 18
Transactions in land
Introduction
815
Introduction to Part
(1)
This Part has effect for the purpose of preventing the avoidance of corporation
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tax by companies concerned with land or the development of land.
(2)
This Part—
(a)
applies the charge to corporation tax on income in some circumstances
to gains of a capital nature obtained from disposing of land (see section
818), and
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(b)
provides for the calculation of the amount charged (see section 822).