Income and Corporation Taxes Act 1988

F1 Dividends and interest passing through the market U.K.

Textual Amendments

F1 Sch. 23A inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 58, Sch. 13 para.1 (with effect as mentioned in s. 58(3) in relation to payments made on or after such day as may be specified: 26.2.1992 specified for certain purposes by S.I. 1992/173, reg.2; 30.6.1992 specified for certain purposes by S.I. 1992/1346, regs.2, 3, 4; 21.4.1993 specified for certain purposes by S.I. 1993/933, regs. 2, 3(b),4)

F2 5 (1) Sub-paragraph (2) below applies in any case where, under a contract or other arrangements for the transfer of securities, a party (“the payment manufacturer”) who satisfies the following condition, that is to say, that he is entitled either—

(a) to a dividend or a periodical payment of interest as the registered holder of the securities, or

(b) to payment, whether directly or indirectly, of any such dividend or interest from a person from whom he acquired the securities or to whom he transferred them,

is required to pay to the other party (“the recipient”) an amount representative of that dividend or interest; and in this paragraph the “manufactured payment” means any payment which the payment manufacturer makes in discharge of that requirement.

(2) Where this sub-paragraph applies—

(a) paragraphs 2, 3 and 4 above and section 737 shall not apply in relation to the manufactured payment,

(b) the dividend or interest shall be treated for all purposes of the Tax Acts as the income of the recipient and not as the income of the payment manufacturer [F3 and shall also be treated, in the case of interest the recipient of which is a company, as if for the purposes of Chapter II of Part IV of the Finance Act 1996 it were interest under a loan relationship to which the company is a party], F4 . . .

(c) the manufactured payment shall not be regarded as the income of the recipient,[F5 and

(d) relief shall not be given under any provision of the Tax Acts to the payment manufacturer in respect of the manufactured payment.]

but this sub-paragraph is subject to sub-paragraphs (3) and (4) below.

(3) In any case where—

(a) any dividend or interest would, apart from the application or, as the case may be, the subsequent application of this sub-paragraph, be treated by virtue of any provision of this paragraph as the income of a person (the “subsequent manufacturer”) who is a party to a further contract or other arrangements for the transfer of securities, and

(b) under that contract or those arrangements, the subsequent manufacturer is required to pay to the other party (the “subsequent recipient”) an amount representative of the dividend or interest (the “subsequent manufactured payment”),

sub-paragraph (4) below shall apply instead of sub-paragraph (2) above (and, on any second or subsequent application of this sub-paragraph, instead of sub-paragraph (4) below as it last applied).

(4) Where this sub-paragraph applies—

(a) paragraphs 2, 3 and 4 above and section 737 shall not apply in relation to the manufactured payment or any subsequent manufactured payment;

(b) the dividend or interest shall be treated for all purposes of the Tax Acts as the income of the subsequent recipient (or, on a second or subsequent application of sub-paragraph (3) above, the last of them) and not as the income of any other person [F3 and shall also be treated, in the case of interest the recipient of which is a company, as if for the purposes of Chapter II of Part IV of the Finance Act 1996 it were interest under a loan relationship to which the company is a party]; F4 . . .

(c) neither the manufactured payment nor any subsequent manufactured payment shall be regarded as the income of the recipient or of any subsequent recipient;[F6 and

(d) relief shall not be given under any provision of the Tax Acts to the payment manufacturer or any subsequent manufacturer in respect of the manufactured payment or any subsequent manufactured payment.]

but this sub-paragraph is subject to any subsequent application of sub-paragraph (3) above.

(5) Notwithstanding anything in sub-paragraphs (1) to (4) above, in any case where—

(a) the dividend or interest is an overseas dividend,

(b) the payment manufacturer or a subsequent manufacturer is resident in the United Kingdom but the recipient or a subsequent recipient is not so resident, and

(c) the rates of overseas tax or overseas tax credit applicable to the overseas dividend in relation to the payment manufacturer or subsequent manufacturer falling within paragraph (b) above are different from what they would have been in relation to the recipient or subsequent recipient falling within that paragraph, had the overseas dividend been paid directly to him,

dividend manufacturing regulations may, in such cases as may be prescribed, make provision for tax to be charged on, or for credit in respect of tax to be given to, such one of the manufacturers falling within paragraph (b) above as may be determined in accordance with the regulations, at such rates as may be so determined.

(6) Any reference in this paragraph to securities is a reference to United Kingdom equities, United Kingdom securities [F7 , other than gilt-edged securities (within the meaning of section 51A),] or overseas securities.

[F8 (7) In this paragraph “relief” means relief by way of—

(a) deduction in computing profits or gains; or

(b) deduction or set off against income or total profits.]

Textual Amendments

F2 Sch. 23A inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 58, Sch. 13 para. 1 (with effect as mentioned in s. 58(3) in relation to payments made on or after such day as may be specified: 26.2.1992 specified for certain purposes by S.I. 1992/173, reg.2; 30.6.1992 specified for certain purposes by S.I. 1992/1346, regs.2, 3, 4; 21.4.1993 specified for certain purposes by S.I. 1993/933, regs.2, 3(b), 4)

F3 Words in Sch. 23A para. 5(2)(b)(4)(b) inserted (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), Sch. 14 para. 52(5) (with Sch. 15)

F4 Sch. 23A para. 5(2)(4): word at the end of para. (b) in each case repealed (with application in accordance with s. 123(7) of the repealing Act) by Finance Act 1994 (c. 9), s. 123(3)(4), Sch. 26 Pt. 5(14), Note

F5 Sch. 23A para. 5(2)(d) and preceding word inserted (with application in accordance with s. 123(7) of the amending Act) by Finance Act 1994 (c. 9), s. 123(3)

F6 Sch. 23A para. 5(4)(d) and preceding word inserted (with application in accordance with s. 123(7) of the amending Act) by Finance Act 1994 (c. 9), s. 123(4)

F7 Words in Sch. 23A para. 5(6) inserted (with effect in accordance with s. 82(4) of the amending Act) by Finance Act 1995 (c. 4), s. 82(3); S.I. 1995/2933, art. 2

F8 Sch. 23A para. 5(7) inserted (with application in accordance with s. 123(7) of the amending Act) by Finance Act 1994 (c. 9), s. 123(5)