Corporation Tax Act 2010

Part 17 Manufactured payments and repos

Manufactured dividends and manufactured overseas dividends: distributions paid before 1 July 2009

90 (1) In relation to distributions paid before 1 July 2009, Chapters 2 and 3 of Part 17 have effect with the following modifications.

(2) Section 783 is omitted.

(3) The following is substituted for section 784—

“784 Manufactured dividends on shares

(1) This section applies if a person pays a manufactured dividend to another person.

(2) The Corporation Tax Acts apply in relation to—

(a) the recipient of the manufactured dividend, and

(b) companies claiming title through or under the recipient,

as if the manufactured dividend were a dividend on the shares.

(3) If the payer is a UK resident company, the Corporation Tax Acts apply in relation to the payer as if the manufactured dividend were a dividend of the company.

(4) Subsection (1) is subject to—

(a) section 786 (treatment of recipient: Real Estate Investment Trusts),

(b) section 796 (manufactured dividends: amounts exceeding underlying payments), and

(c) section 803 (power to deal with special cases).”

(4) In section 786(1) “(instead of section 784(2))” is substituted for “(instead of section 784(1))”.

(5) Section 787 is omitted.

(6) In section 788(6)(a) “section 784(2)” is substituted for “section 784(1)”.

(7) The following is substituted for section 791—

“791 Treatment of payer of manufactured overseas dividend

(1) This section applies if a person (“the payer”) pays another person a manufactured overseas dividend.

(2) If—

(a) the payer is a company carrying on a trade, and

(b) the manufactured overseas dividend relates to the trade,

the manufactured overseas dividend is treated as an expense of the trade.

(3) If—

(a) the payer is a company with an investment business, and

(b) the manufactured overseas dividend relates to the business,

the manufactured overseas dividend is treated as expenses of management within Part 16 of CTA 2009 (companies with investment business).

(4) Subsection (5) applies if the payer is a company carrying on life assurance business.

(5) So far as the manufactured overseas dividend is referable to basic life assurance and general annuity business, the manufactured overseas dividend is treated for the purposes of section 76 of ICTA (expenses of insurance companies) as if it were an expense payable falling to be brought into account at step 3 of section 76(7) of ICTA (amount of expenses deduction).

(6) The manufactured overseas dividend is to be treated as so referable so far as the overseas dividend of which it is representative—

(a) is treated under section 432A of ICTA (apportionment of income and gains) as so referable, or

(b) would be so treated if received by the payer.”

(8) Section 795 is omitted.

91 Accordingly, in relation to distributions paid before 1 July 2009—

(a) the paragraph of Schedule 1 that amends section 577 of ITA 2007 has effect as if in sub-paragraph (4) of that paragraph the words after “substitute” were ““section 784(2) of CTA 2010”.”, and

(b) section 1221(1)(i) of CTA 2009 (as inserted by Schedule 1) has effect with the substitution of “section 791(3) of CTA 2010” for “section 791(4) of CTA 2010”.

Manufactured overseas dividends: overseas dividends paid before 22 April 2009

92 (1) In relation to overseas dividends paid before 22 April 2009, Chapter 3 of Part 17 has effect with the following modifications (in addition to any modifications that may apply under paragraph 90).

(2) The following is substituted for section 792—

“792 Treatment of recipient of manufactured overseas dividend

(1) This section applies if—

(a) a person pays a manufactured overseas dividend, and

(b) the condition in subsection (2) is met.

(2) The condition is that—

(a) in a case within section 922(1) of ITA 2007 (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) of that Act (foreign payers of manufactured 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 companies claiming title through or under the recipient, for all purposes of the Corporation Tax Acts except Part 5 of CTA 2009 (loan relationships).

(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 amount deducted as a result of section 922 of ITA 2007 or, as the case may be, accounted for and paid as a result of section 923 of that Act.

(5) The amount so deducted or so 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.

(6) Subsections (3) and (4) are subject to—

(a) section 797 (manufactured overseas dividends: amounts exceeding underlying payments), and

(b) section 798 (manufactured overseas dividends less than underlying payments).”

(3) Sections 793 and 794 are omitted.

(4) In this paragraph “overseas dividend” has the same meaning as in Part 17.

Deemed manufactured payments: stock lending arrangements

93 In relation to any dividend or interest on securities paid before 22 April 2009, section 812 has effect with the omission of subsections (4) and (5).

94 Section 812 does not apply if the arrangement mentioned in subsection (1)(a) of that section was made on or after 1 July 1997.