“41 Exemption from duty of beer produced for private consumption.

The duty on beer produced in the United Kingdom shall not be chargeable on beer produced by a person who produces beer only for his own domestic use.”

“(3)

In the case of beer produced in the United Kingdom, the person intending to remove, export or ship the beer shall produce to the proper officer a declaration made by the person who paid the duty on the beer, in such form and manner as the Commissioners may direct, stating the strength of the beer and the date on which the duty became payable.”

“46 Remission or repayment of duty on spoilt beer.

(1)

Where it is shown to the satisfaction of the Commissioners that any beer which has been removed from any premises of a registered brewer in respect of which he is registered under section 47 below has become spoilt or otherwise unfit for use and, in the case of beer delivered to another person, has been returned to the registered brewer as so spoilt or unfit, the Commissioners shall, subject to compliance with such conditions as they may by regulations impose, remit or repay any duty charged or paid in respect of the beer.

(2)

If any person contravenes or fails to comply with any regulation made under subsection (1) above, he shall be liable on summary conviction to a penalty not exceeding level 3 on the standard scale.”

“49 Beer regulations.

(1)

The Commissioners may, with a view to managing, securing and collecting the duty on beer produced in, or imported into, the United Kingdom or to the protection of the revenues derived from the duty of excise on beer, make regulations—

(a)

regulating the production, packaging, keeping and storage of beer produced in the United Kingdom and the packaging, keeping and storage of beer imported into the United Kingdom;

(b)

regulating the registration of persons and premises under section 41A or 47 above and the revocation or variation of any such registrations;

(c)

for determining under or in accordance with the regulations when the production of beer begins and when it is completed;

(d)

for securing and collecting the duty;

(e)

for determining the duties chargeable, the rates of those duties, the persons liable to pay them and in that connection prescribing the method of charging the duties, the due dates for payment and the method of payment;

(f)

for charging the duty, in such circumstances as may be prescribed in the regulations, by reference to a strength which the beer might reasonably be expected to have, or the rate of duty in force, at a time other than that at which the beer becomes chargeable;

(g)

for relieving beer from the duty in such circumstances and to such extent as may be prescribed in the regulations;

(h)

regulating and, in such circumstances as may be prescribed in the regulations, prohibiting the addition of substances to, the mixing of, or the carrying out of other operations on or in relation to, beer;

(j)

regulating the transportation of beer in such circumstances as may be prescribed in the regulations.

(2)

Regulations under this section may make different provision for persons, premises or beer of different classes or descriptions, for different circumstances and for different cases.

(3)

Any person contravening or failing to comply with any regulation made under this section shall be liable on summary conviction to a penalty not exceeding level 5 on the standard scale, and any article or substance in respect of which the offence was committed shall be liable to forfeiture.”

“(4)

The amount of any excise duty on beer which is due at the relevant date from the debtor and which became due within a period of 6 months next before that date.”

“5A

The amount of any excise duty on beer which is due at the relevant date from the debtor and which became due within a period of 6 months next before that date.”

“5A

The amount of any excise duty on beer which is due at the relevant date from the debtor and which became due within a period of 6 months next before that date.”

“(1A)

In the case of a company carrying on basic life assurance and general annuity business, the new annuities paid in any accounting period by the company shall be regarded as charges on income only to the extent that they do not exceed the income limit for that accounting period.

(1B)

Subsection (1A) above shall not apply to an insurance company charged to corporation tax in accordance with the provisions applicable to Case I of Schedule D in respect of the profits of its life assurance business.

(1C)

For the purposes of this section—

(a)

“new annuity means any annuity, so far as paid under a contract made by an insurance company in an accounting period beginning on or after 1st January 1992 and so far as referable to the company’s basic life assurance and general annuity business;

(b)

“the income limit for an accounting period of an insurance company is the difference between—

(i)

the total amount of the new annuities paid by the company in that accounting period; and

(ii)

the total of the capital elements contained in the new annuities so paid; and

(c)

the capital element contained in an annuity shall be determined in accordance with Chapter V of Part XIV, but for this purpose—

(i)

it is immaterial whether or not an annuitant claims any relief to which he is entitled under that Chapter; and

(ii)

where, by virtue of subsection (2) of section 657, section 656 does not apply to an annuity, the annuity shall be treated as containing the capital element that it would have contained apart from that subsection.

(1D)

In any case where—

(a)

a payment in respect of an annuity is made by an insurance company under a group annuity contract made in an accounting period beginning before 1st January 1992,

(b)

the company’s liabilities first include an amount in respect of that annuity in an accounting period beginning on or after that date, and

(c)

the company’s liability in respect of that annuity is referable to its basic life assurance and general annuity business,

the payment shall be treated for the purposes of this section, other than this subsection, as if the group annuity contract had been made in an accounting period beginning on or after 1st January 1992 (and, accordingly, as payment of a new annuity).

(1E)

In any case where—

(a)

a payment in respect of an annuity is made by a reinsurer under a reinsurance treaty made in an accounting period beginning before 1st January 1992,

(b)

the reinsurer’s liabilities first include an amount in respect of that annuity in an accounting period beginning on or after that date, and

(c)

the reinsurer’s liability in respect of that annuity is referable to its basic life assurance and general annuity business,

the payment shall, as respects the reinsurer, be treated for the purposes of this section, other than this subsection, as if the reinsurance treaty had been made in an accounting period beginning on or after 1st January 1992 (and, accordingly, as payment of a new annuity).

(1F)

In this section—

“group annuity contract means a contract between an insurance company and some other person under which the company undertakes to become liable to pay annuities to or in respect of such persons as may subsequently be specified or otherwise ascertained under or in accordance with the contract (whether or not annuities under the contract are also payable to or in respect of persons who are specified or ascertained at the time the contract is made);

“reinsurance treaty means a contract under which one insurance company is obliged to cede, and another (in this section referred to as a “reinsurer) to accept, the whole or part of a risk of a class or description to which the contract relates.”

“(1)

In sections 85 to 89 below “basic life assurance and general annuity business has the same meaning as in Chapter I of Part XII of the Taxes Act 1988.”

“462A Election as to tax exempt business.

(1)

Where a registered friendly society has tax exempt life or endowment business which includes contracts—

(a)

made before 20th March 1991, and

(b)

expressed at the outset not to be made in the course of such business,

the society may by notice to the inspector elect that section 460(1) shall not apply to so much of the profits arising from such business as is attributable to such contracts.

(2)

Where a registered friendly society has tax exempt life or endowment business which includes contracts falling within subsection (3) below, the society may by notice to the inspector elect that section 460(1) shall not apply to so much of the profits arising from such business as is attributable to such contracts.

(3)

A contract falls within this subsection if—

(a)

at the outset, it is neither expressed to be made in the course of tax exempt life or endowment business nor expressed not to be so made but is assumed by the society not to be so made, and

(b)

the policy issued in pursuance of it falls within paragraph 21(1)(b) of Schedule 15.

(4)

An election under subsection (2) above shall only be valid if the society satisfies the inspector (or the Commissioners on appeal) that it is possible to identify all the contracts to which the election relates.

(5)

If the inspector decides that he is not satisfied as mentioned in subsection (4) above, he shall give notice of his decision to the society; and section 42(3), (4) and (9) of, and paragraph 1(1) to (1E) of Schedule 2 to, the Management Act shall apply in relation to such a decision as they apply in relation to a decision of an inspector on a claim.

(6)

An election under subsection (1) or (2) above shall have effect for accounting periods ending on or after the day on which the Finance Act 1991 was passed.

(7)

No election under subsection (1) or (2) above may be made after 31st July 1992.

(8)

Where a friendly society has made an election under subsection (1) or (2) above, then, for any accounting period for which the election has effect—

(a)

section 460(1) shall apply to profits arising from life or endowment business which would have been included in the society’s tax exempt life or endowment business had no account been taken of the contracts to which the election relates, and

(b)

section 462(1), in its application to the society, shall have effect with the insertion after “societies” of “and all policies issued in pursuance of contracts to which an election under section 462A(1) or (2) relates”.”

“587A New issues of securities: extra return.

(1)

This section applies where—

(a)

securities (old securities) of a particular kind are issued by way of the original issue of securities of that kind,

(b)

on a later occasion securities (new securities) of the same kind are issued,

(c)

a sum (the extra return) is payable in respect of the new securities, by the person issuing them, to reflect the fact that interest is accruing on the old securities,

(d)

the issue price of the new securities includes an element (whether or not separately identified) representing payment for the extra return, and

(e)

the extra return is equal to the amount of interest payable for the relevant period on so many old securities as there are new (or, if there are more new securities than old, the amount of interest which would be so payable if there were as many old securities as new).

(2)

Anything payable or paid by way of the extra return shall be treated for the purposes of the Tax Acts as payable or paid by way of interest (to the extent that it would not be so treated apart from this subsection).

(3)

But as regards any payment by way of the extra return, relief shall not be given under any provision of the Tax Acts to the person by whom the new securities are issued; and “relief here means relief by way of deduction in computing profits or gains or deduction or set off against income or total profits.

(4)

For the purposes of this section securities are of the same kind if they are treated as being of the same kind by the practice of a recognised stock exchange or would be so treated if dealt with on such a stock exchange.

(5)

For the purposes of this section the relevant period is the period beginning with the day following the relevant day and ending with the day on which the new securities are issued.

(6)

For the purposes of this section the relevant day is—

(a)

the last (or only) interest payment day to fall in respect of the old securities before the day on which the new securities are issued, or

(b)

the day on which the old securities were issued, in a case where no interest payment day fell in respect of them before the day on which the new securities are issued;

and an interest payment day, in relation to the old securities, is a day on which interest is payable under them.”

“726A New issues of securities.

(1)

This section applies where—

(a)

securities (old securities) of a particular kind are issued by way of the original issue of securities of that kind,

(b)

on a later occasion securities (new securities) of the same kind are issued,

(c)

a sum (the extra return) is payable in respect of the new securities, by the person issuing them, to reflect the fact that interest is accruing on the old securities,

(d)

the issue price of the new securities includes an element (whether or not separately identified) representing payment for the extra return, and

(e)

the extra return is equal to the amount of interest payable for the relevant period on so many old securities as there are new (or, if there are more new securities than old, the amount of interest which would be so payable if there were as many old securities as new).

(2)

For the purposes of sections 710 to 728—

(a)

the new securities shall be treated as having been issued on the relevant day;

(b)

they shall be treated as transferred to the person to whom they are in fact issued (though not treated as transferred by any person);

(c)

the transfer shall be treated as a transfer with accrued interest and as made on the day on which the new securities are in fact issued;

(d)

that day shall be treated as the settlement day (notwithstanding section 712);

but this subsection is subject to subsection (7) below.

(3)

If the new securities are in fact issued under an arrangement by virtue of which the acquirer accounts to the issuer separately for the extra return mentioned in subsection (1) above and the rest of the issue price, in relation to the transfer mentioned in subsection (2)(b) above—

(a)

section 713(4) shall not apply, and

(b)

for the purposes of section 713(2) the accrued amount shall be the amount found under subsection (4) or (5) below (as the case may be);

and here “the acquirer means the person to whom the new securities are in fact issued and “the issuer means the person by whom they are in fact issued.

(4)

Subject to subsection (5) below, the amount is one equal to the amount (if any) of the extra return separately accounted for.

(5)

If the interest on the new securities is payable in a currency other than sterling, the amount is the sterling equivalent on the settlement day of the amount found under subsection (4) above; and for this purpose the sterling equivalent of an amount on the settlement day is the sterling equivalent calculated by reference to the London closing rate of exchange for that day.

(6)

If the new securities are in fact issued otherwise than as mentioned in subsection (3) above, section 713(4)(b) shall apply in relation to the transfer mentioned in subsection (2)(b) above.

(7)

If the new securities are securities to which section 717 applies (after applying subsection (2)(a) above) subsection (2)(b) to (d) above shall not apply.

(8)

For the purposes of this section the relevant period is the period beginning with the day following the relevant day and ending with the day on which the new securities are in fact issued.

(9)

For the purposes of this section the relevant day is—

(a)

the last (or only) interest payment day to fall in respect of the old securities before the day on which the new securities are in fact issued, or

(b)

the day on which the old securities were issued, in a case where no interest payment day fell in respect of them before the day on which the new securities are in fact issued.”

“Schedule 23A MANUFACTURED DIVIDENDS AND INTEREST

Section 736A.

Interpretation

1

(1)

In this Schedule—

“approved stock lending arrangement means an arrangement such as is mentioned in subsection (1), (2) or (2A) of section 129 and in relation to which that section and section 149B(9) of the 1979 Act apply;

“dividend manufacturer has the meaning given by paragraph 2(1) below;

“dividend manufacturing regulations means regulations made by the Treasury under this Schedule;

“interest manufacturer has the meaning given by paragraph 3(1) below;

“manufactured dividend, “manufactured interest and “manufactured overseas dividend shall be construed respectively in accordance with paragraphs 2, 3 and 4 below, as shall references to the gross amount thereof;

“market maker, in relation to any shares, stock or other securities, means a person who—

(a)

holds himself out at all normal times in compliance with the rules of the Stock Exchange as willing to buy and sell shares, stock or other securities of the kind concerned at a price specified by him, and

(b)

is recognised as doing so by the Council of the Stock Exchange,

but subject to any regulations under sub-paragraph (2) below;

“overseas dividend means any interest, dividend or other annual payment payable in respect of any overseas securities;

“overseas dividend manufacturer has the meaning given by paragraph 4(1) below;

“overseas securities means—

(a)

shares, stock or other securities issued by a government or public or local authority of a territory outside the United Kingdom or by any other body of persons not resident in the United Kingdom; and

(b)

quoted Eurobonds held in a recognised clearing system, within the meaning of section 124;

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

“overseas tax credit means any such credit under the law of a territory outside the United Kingdom in respect of overseas tax as corresponds to a tax credit;

“prescribed means prescribed in dividend manufacturing regulations;

“recognised clearing house means a recognised clearing house within the meaning of the Financial Services Act 1986;

“recognised investment exchange means a recognised investment exchange within the meaning of that Act;

“securities includes any loan stock or similar security;

“transfer includes any sale or other disposal;

“unapproved manufactured payment, subject to any regulations under sub-paragraph (2) below, means—

(a)

any manufactured dividend, manufactured interest or manufactured overseas dividend paid in connection with an unapproved stock lending arrangement, and

(b)

any manufactured dividend or manufactured interest not falling within paragraph (a) above which is paid in respect of United Kingdom securities or United Kingdom equities by a person other than one who is—

(i)

a market maker in relation to United Kingdom securities or United Kingdom equities of the kind in question, or

(ii)

in such circumstances as may be prescribed, a member, of a prescribed class or description, of a prescribed recognised investment exchange, or

(iii)

in such circumstances as may be prescribed, a prescribed recognised clearing house,and which is so paid otherwise than in connection with an approved stock lending arrangement;

“unapproved stock lending arrangement means an arrangement such as is mentioned in subsection (1), (2) or (2A) of section 129, but which, in consequence of regulations under subsection (4) of that section, is not an approved stock lending arrangement;

“United Kingdom equities means shares of any company resident in the United Kingdom;

“United Kingdom securities means securities of the government of the United Kingdom, of any public or local authority in the United Kingdom or of any company or other body resident in the United Kingdom, but does not include quoted Eurobonds held in a recognised clearing system, within the meaning of section 124, or United Kingdom equities.

(2)

Dividend manufacturing regulations may amend sub-paragraph (1) above—

(a)

by changing the definition for the time being of “market maker”; or

(b)

by changing the definition for the time being of “unapproved manufactured payment”.

Manufactured dividends on United Kingdom equities

2

(1)

This paragraph applies in any case where, under a contract or other arrangements for the transfer of United Kingdom equities, one of the parties (the “dividend manufacturer) is required to pay to the other ( “the recipient) an amount representative of a dividend on the equities; and in this Schedule the “manufactured dividend means any payment which the dividend manufacturer makes in discharge of that requirement.

(2)

If, in a case where this paragraph applies, the dividend manufacturer is a company resident in the United Kingdom, then, for all purposes of the Tax Acts, the manufactured dividend shall be treated as if it were a dividend of, and paid by, the dividend manufacturer (and shall accordingly be a distribution of the dividend manufacturer for those purposes).

(3)

If, in a case where this paragraph applies, the dividend manufacturer is not such a company as is mentioned in sub-paragraph (2) above (so that section 737 applies in relation to the dividend manufacturer) the manufactured dividend shall for all purposes of the Tax Acts be treated in relation to the recipient and all persons claiming title through or under him—

(a)

as if the manufactured dividend were a dividend on the United Kingdom equities,

(b)

as if any amount required in consequence of section 737 to be deducted by the dividend manufacturer on account of income tax in respect of the gross amount of the manufactured dividend were required to be accounted for by him as advance corporation tax in respect of the dividend, and

(c)

as if any certificate of deduction of tax required in consequence of that section to be issued in connection with the manufactured dividend were the tax credit certificate that would have been issued had the manufactured dividend in fact been a dividend on the United Kingdom equities.

(4)

For the purposes of sub-paragraph (3)(b) above, the gross amount of a manufactured dividend is the aggregate of the amount of the manufactured dividend and the amount of the tax credit that would have been issued in respect thereof had the manufactured dividend in fact been a dividend on the United Kingdom equities.

Manufactured interest on United Kingdom securities

3

(1)

This paragraph applies in any case where, under a contract or other arrangements for the transfer of United Kingdom securities, one of the parties (the “interest manufacturer) is required to pay to the other ( “the recipient) an amount representative of a periodical payment of interest on the securities; and in this Schedule the “manufactured interest means any payment which the interest manufacturer makes in discharge of that requirement.

(2)

If, in a case where this paragraph applies, the interest manufacturer is a company resident in the United Kingdom, then, for all purposes of the Tax Acts, the gross amount of the manufactured interest shall be treated as if it were the gross amount of a periodical payment of interest on the securities, but made by the interest manufacturer.

(3)

If, in a case where this paragraph applies, the interest manufacturer is not such a company as is mentioned in sub-paragraph (2) above (so that section 737 applies in relation to the interest manufacturer) the gross amount of the manufactured interest shall for all purposes of the Tax Acts be treated in relation to the recipient, and all persons claiming title through or under him, as if it were the gross amount of a periodical payment of interest on the securities, but made by the interest manufacturer.

(4)

For the purposes of this paragraph the gross amount of any manufactured interest is an amount equal to the gross amount of that periodical payment of interest of which the manufactured interest is representative, as mentioned in sub-paragraph (1) above.

Manufactured overseas dividends

4

(1)

This paragraph applies in any case where, under a contract or other arrangements for the transfer of overseas securities, one of the parties (the “overseas dividend manufacturer) is required to pay to the other ( “the recipient) an amount representative of an overseas dividend on the overseas securities; and in this Schedule the “manufactured overseas dividend means any payment which the overseas dividend manufacturer makes in discharge of that requirement.

(2)

Subject to sub-paragraph (3) below, where this paragraph applies the gross amount of the manufactured overseas dividend shall be treated for all purposes of the Tax Acts as an annual payment, within section 349, but—

(a)

the amount which is to be deducted from that gross amount on account of income tax shall be an amount equal to the relevant withholding tax on that gross amount; and

(b)

in the application of sections 338(4)(a) and 350(4) in relation to manufactured overseas dividends the references to Schedule 16 shall be taken as references to dividend manufacturing regulations;

and paragraph (a) above is without prejudice to any further amount required to be deducted under dividend manufacturing regulations by virtue of sub-paragraph (8) below.

(3)

If, in a case where this paragraph applies, the overseas dividend manufacturer is not resident in the United Kingdom and the manufactured overseas dividend is paid by him otherwise than in the course of a trade which he carries on through a branch or agency in the United Kingdom, sub-paragraph (2) above shall not apply; but if the manufactured overseas dividend is received by a person resident in the United Kingdom (the “United Kingdom recipient), then unless the United Kingdom recipient shows either—

(a)

that the overseas dividend manufacturer was entitled to payment of the overseas dividend as the registered holder of the overseas securities, or

(b)

that the overseas dividend manufacturer was entitled to payment of the overseas dividend directly or indirectly from a person from whom he acquired the overseas securities, or to whom he transferred them, and who was so entitled to the payment,

the United Kingdom recipient shall account for and pay an amount of tax in respect of the manufactured overseas dividend equal to that which the overseas dividend manufacturer would have been required to account for and pay had he been resident in the United Kingdom; and any reference in this Schedule to an amount deducted under sub-paragraph (2) above includes a reference to an amount of tax accounted for and paid under this sub-paragraph.

(4)

Where a manufactured overseas dividend is paid after deduction of the amount required by sub-paragraph (2) above, or where the amount of tax required under sub-paragraph (3) above in respect of such a dividend has been accounted for and paid, then for all purposes of the Tax Acts as they apply in relation to persons resident in the United Kingdom or to persons not so resident but carrying on business through a branch or agency in the United Kingdom—

(a)

the manufactured overseas dividend shall be treated in relation to the recipient, and all persons claiming title through or under him, as if it were an overseas dividend of an amount equal to the gross amount of the manufactured overseas dividend, but paid after the withholding therefrom, on account of overseas tax, of the amount deducted under sub-paragraph (2) above; and

(b)

the amount so deducted shall accordingly be treated in relation to the recipient, and all persons claiming title through or under him, as an amount so withheld instead of as an amount on account of income tax.

(5)

For the purposes of this paragraph—

(a)

“relevant withholding tax, in relation to the gross amount of a manufactured overseas dividend, means an amount of tax representative of—

(i)

the amount (if any) 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

(ii)

the amount of the overseas tax credit (if any) in respect of such an overseas dividend;

(b)

the gross amount of a manufactured overseas dividend is an amount equal to the gross amount of that overseas dividend of which the manufactured overseas dividend is representative, as mentioned in sub-paragraph (1) above; and

(c)

the gross amount of an overseas dividend is an amount equal to the aggregate of—

(i)

so much of the overseas dividend as remains after the deduction of the overseas tax (if any) chargeable on it;

(ii)

the amount of the overseas tax (if any) so deducted; and

(iii)

the amount of the overseas tax credit (if any) in respect of the overseas dividend.

(6)

Dividend manufacturing regulations may make provision with respect to the rates of relevant withholding tax which are to apply in relation to manufactured overseas dividends in relation to different overseas territories, but in prescribing those rates the Treasury shall have regard to—

(a)

the rates at which overseas tax would have fallen to be deducted, and

(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.

(7)

Dividend manufacturing regulations may make provision for a person who, in any chargeable period, is an overseas dividend manufacturer to be entitled in prescribed circumstances to set off against each other, in accordance with the regulations—

(a)

overseas tax in respect of any overseas dividends, or amounts deducted under sub-paragraph (2) above from any manufactured overseas dividends, received by him in that chargeable period, and

(b)

the sums due from him on account of the amounts deducted by him under sub-paragraph (2) above from the manufactured overseas dividends paid by him in that chargeable period,

and account to the Board for, or as the case may be, claim credit in respect of, the balance.

(8)

Dividend manufacturing regulations may also make provision for cases where a manufactured overseas dividend is paid or otherwise dealt with in circumstances such that, had it been an overseas dividend in respect of the overseas securities, it would have been—

(a)

a relevant foreign dividend, within the meaning of section 123,

(b)

a foreign dividend, within the meaning of that section,

(c)

interest on a quoted Eurobond held in a recognised clearing system, within the meaning of section 124, or

(d)

an overseas public revenue dividend, within the meaning of Part III,

and, notwithstanding anything in sub-paragraph (2) or (3) above, any such regulations may provide for deductions of an amount determined by reference to the gross amount of the manufactured overseas dividend to be made from the manufactured overseas dividend on account of income tax similar to the deductions that would, in the case of an overseas dividend, be made under subsection (2) or (3) of section 123 or under Part III, as the case may be, and for Parts III and IV of Schedule 3 to apply with prescribed modifications in relation thereto.

Dividends and interest passing through the market

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, and

(c)

the manufactured payment shall not be regarded as the income of the recipient,

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; and

(c)

neither the manufactured payment nor any subsequent manufactured payment shall be regarded as the income of the recipient or of any subsequent recipient;

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 or overseas securities.

Unapproved manufactured payments

6

(1)

This paragraph applies where a person makes an unapproved manufactured payment.

(2)

Where the unapproved manufactured payment is a manufactured dividend paid by a company, any advance corporation tax paid by the company in respect of the manufactured dividend—

(a)

shall not be set against any liability of the company to corporation tax as mentioned in section 239;

(b)

shall not be surrendered under, or otherwise treated as mentioned in, section 240; and

(c)

shall not be utilised in any other way for the purposes of the Tax Acts;

and no franked investment income of a company shall be used to frank (within the meaning of section 241(5)) the manufactured dividend.

(3)

Where the unapproved manufactured payment is manufactured interest paid by a company—

(a)

relief shall not be given to the company under any provision of the Tax Acts in respect of any amount which the company is required to deduct from the payment on account of income tax; and

(b)

the company shall not be entitled under paragraph 5(1) of Schedule 16 to claim to set income tax borne by deduction from payments received by it against the income tax which it is liable to pay in respect of the payment of manufactured interest.

(4)

Where the unapproved manufactured payment is a manufactured overseas dividend—

(a)

relief shall not be given to any person under any provision of the Tax Acts in respect of any amount which he is required to deduct from the payment on account of income tax; and

(b)

a person shall not be entitled under or by virtue of this Schedule to set—

(i)

overseas tax in respect of overseas dividends received by him, or

(ii)

an amount deducted under paragraph 4(2) above in respect of manufactured overseas dividends received by him,

against any income tax which he is liable to pay in respect of the payment of the manufactured overseas dividend.

(5)

If it appears to an inspector that, notwithstanding the foregoing provisions of this paragraph, franked investment income of a company has been used to frank a manufactured dividend which is an unapproved manufactured payment, he may make an assessment on the dividend manufacturer under sub-paragraph (3) of paragraph 3 of Schedule 13 and that sub-paragraph shall accordingly apply in relation to the amount of advance corporation tax in question.

(6)

If it appears to an inspector that, notwithstanding the foregoing provisions of this paragraph, income tax on income received by an interest manufacturer has been set against an amount deducted by the interest manufacturer on account of income tax on a payment of manufactured interest which is an unapproved manufactured payment, the inspector may make an assessment on the interest manufacturer under paragraph 4 of Schedule 16 and that paragraph shall accordingly apply in relation to the amount of income tax in question.

(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.

Irregular manufactured payments

7

(1)

Except where paragraph 5(2) or (4) above applies, in any case where (apart from this paragraph)—

(a)

an amount paid by way of manufactured dividend would exceed the amount of the dividend of which it is representative, or

(b)

the aggregate of—

(i)

an amount paid by way of manufactured interest or manufactured overseas dividend, and

(ii)

the tax required to be accounted for in connection with the making of that payment,

would exceed the gross amount (as determined in accordance with paragraph 3 or 4 above) of the interest or overseas dividend of which it is representative, as the case may be,

the payment shall, to the extent of an amount equal to the excess, not be regarded for the purposes of this Schedule as made in discharge of the requirement referred to in paragraph 2(1), 3(1) or 4(1) above, as the case may be, but shall instead to that extent be taken for all purposes of the Tax Acts to constitute a separate fee for entering into the contract or other arrangements under which it was made, notwithstanding anything in paragraphs 2 to 4 above.

(2)

Dividend manufacturing regulations may make provision in such circumstances and for such purposes of the Tax Acts as may be prescribed for such a fee as is mentioned in sub-paragraph (1) above to be treated as paid in any case that would fall within that sub-paragraph, apart from paragraph 5 above; and, without prejudice to the generality of the foregoing, any such regulations may in particular provide—

(a)

for the amount of the fee to be determined in accordance with the regulations, and

(b)

for such of the persons mentioned in that paragraph as may be prescribed to be treated as paying or, as the case may be, as receiving the fee,

and it is immaterial for the purposes of paragraph (b) above whether or not the person prescribed would, apart from paragraph 5 above, have been regarded by virtue of sub-paragraph (1) above as paying or receiving a fee, or as paying it to, or receiving it from, any other person prescribed under paragraph (b) above.

(3)

For the purpose of giving relief under any provision of the Tax Acts in a case falling within paragraph 3(1) or 4(1) above where (apart from this paragraph) the aggregate referred to in sub-paragraph (1)(b) above would be less than the gross amount there mentioned—

(a)

the gross amount of the manufactured interest or manufactured overseas dividend shall be taken to be an amount equal to the aggregate referred to in sub-paragraph (1)(b) above, except where paragraph 6 above applies, and

(b)

where paragraph 6 above applies, the gross amount of the manufactured interest or manufactured overseas dividend shall be taken to be only the amount referred to in sub-paragraph (1)(b)(i) above,

notwithstanding anything in paragraph 3, 4 or 6 above.

(4)

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.

Dividend manufacturing regulations: general

8

(1)

Dividend manufacturing regulations may make provision for—

(a)

such manufactured dividends, manufactured interest or manufactured overseas dividends as may be prescribed, or

(b)

such dividend manufacturers, interest manufacturers or overseas dividend manufacturers as may be prescribed,

to be treated in prescribed circumstances otherwise than as mentioned in paragraph 2, 3 or 4 above for the purposes of such provisions of the Tax Acts as may be prescribed.

(2)

Dividend manufacturing regulations may make provision with respect to—

(a)

the accounts and other records which are to be kept,

(b)

the vouchers which are to be issued or produced,

(c)

the returns which are to be made,

(d)

the manner in which amounts required to be deducted or accounted for under or by virtue of this Schedule on account of tax are to be accounted for and paid,

by dividend manufacturers, interest manufacturers or overseas dividend manufacturers in connection with the manufacturing of dividends, interest or overseas dividends.

(3)

Dividend manufacturing regulations may—

(a)

make provision for prescribed provisions of the Management Act to apply in relation to manufactured dividends, manufactured interest or manufactured overseas dividends with such modifications, specified in the regulations, as the Treasury think fit;

(b)

make such further provision with respect to the administration, assessment, collection and recovery of amounts required to be deducted or accounted for under or by virtue of this Schedule on account of tax as the Treasury think fit.

(4)

Dividend manufacturing regulations may make different provision for different cases.”

(c)

a repayment of corporation tax or income tax falling to be made as a result of a claim under section 393A(1) to have the whole or any part of a loss incurred in an accounting period set off against profits of an earlier accounting period ( “the earlier period)—

(i)

shall, in a case where the earlier period falls wholly within the period of twelve months immediately preceding the accounting period in which the loss was incurred, be treated as a repayment of tax paid for the earlier period; and

(ii)

in any other case, shall be treated as a repayment of tax paid for the accounting period in which the loss is incurred; and

(d)

a payment of the whole or part of a tax credit falling to be made as a result of a claim under section 242, to the extent that a surplus of franked investment income for an accounting period (the “earlier period) is treated as there mentioned for the purpose of setting a loss incurred in a later accounting period against total profits under section 393A(1)—

(i)

shall, in a case where the earlier period falls wholly within the period of twelve months immediately preceding the accounting period in which the loss is incurred, be treated as a payment in respect of franked investment income received in the earlier period; and

(ii)

in any other case, shall be treated as a payment in respect of franked investment income received in the accounting period in which the loss is incurred.”

“(7A)

In any case where—

(a)

a company carrying on a trade incurs a loss in the trade in an accounting period ( “the later period),

(b)

as a result of a claim under section 393A(1), the whole or any part of that loss is set off for the purposes of corporation tax against profits (of whatever description) of an earlier accounting period ( “the earlier period) which does not fall wholly within the period of twelve months immediately preceding the later period, and

(c)

a repayment falls to be made of corporation tax paid for the earlier period or of income tax in respect of a payment received by the company in that accounting period,

then, in determining the amount of interest (if any) payable under this section on the repayment referred to in paragraph (c) above, no account shall be taken of any increase in the amount of that repayment as a result of the claim under section 393A(1), except so far as concerns interest for any time after the date on which any corporation tax for the later period became (or, as the case may be, would have become) due and payable, as mentioned in subsection (2) above.

(7B)

In any case where—

(a)

a company carrying on a trade incurs a loss in the trade in an accounting period ( “the later period),

(b)

as a result of a claim under section 242, the whole or any part of a surplus of franked investment income for an earlier accounting period (the “earlier period) which does not fall wholly within the period of twelve months immediately preceding the later period is treated as there mentioned for the purpose of setting the loss against total profits under section 393A(1), and

(c)

a payment falls to be made of the whole or part of a tax credit comprised in franked investment income received by the company in the earlier period,

then, in determining the amount of interest (if any) payable under this section on the payment referred to in paragraph (c) above, no account shall be taken of any increase in the amount of that payment as a result of the claim under section 242 (to the extent that that section relates to section 393A(1)), except so far as concerns interest for any time after the date on which any corporation tax for the later period became (or, as the case may be, would have become) due and payable, as mentioned in subsection (2) above.”