Corporation Tax Act 2010

Chapter 3 Manufactured overseas dividends

790 Meaning of “manufactured overseas dividend”

“Manufactured overseas dividend” means an amount which—

(a) is representative of an overseas dividend on overseas securities, and

(b) is required to be paid by one person to another under an arrangement between them for the transfer of the overseas securities.

791 Treatment of payer of manufactured overseas dividend

(1) This section applies if—

(a) a company (“the payer”) pays a manufactured overseas dividend, and

(b) the overseas dividend of which the manufactured overseas dividend is representative is taxable.

(2) For this purpose an overseas dividend is taxable if—

(a) it is received by the payer and the charge to corporation tax on income applies to it, or

(b) it is received by a person other than the payer and the charge to corporation tax on income would have applied to it if it had been received by the payer.

(3) If—

(a) the payer carries on a trade to which the manufactured overseas dividend relates, and

(b) neither subsection (4) nor subsection (6) applies,

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

(4) If the payer has investment business to which the manufactured overseas dividend relates, the manufactured overseas dividend is treated as expenses of management of the business for the purposes of Part 16 of CTA 2009.

(5) Subsection (6) applies if the payer carries on life assurance business to which the manufactured overseas dividend relates.

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

(7) For the purposes of subsection (6), the manufactured overseas dividend is treated as referable to basic life assurance and general annuity business so far as the overseas dividend of which it is representative—

(a) is received by the payer and is so referable under section 432A of ICTA (apportionment of income and gains), or

(b) is received by another person and would have been so referable under section 432A of ICTA if it had been received by the payer.

792 Company receiving manufactured overseas dividend from UK resident etc

(1) This section applies if—

(a) a person pays a manufactured overseas dividend,

(b) section 922(1) of ITA 2007 (manufactured overseas dividends: payments by UK residents etc) applies, and

(c) the amount required to be deducted as a result of that section has been deducted.

(2) Subsections (3) and (4) 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).

(3) 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 specified in section 793.

(4) The amount mentioned in subsection (3)(b) is accordingly to be treated as an amount withheld on account of overseas tax instead of as an amount on account of income tax.

(5) 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).

793 Section 792: amount treated as withheld

(1) Except where subsection (3) applies, the amount mentioned in section 792(3)(b) is the amount deducted under section 922(2) of ITA 2007.

(2) Subsection (3) applies if the deduction under section 922(2) of ITA 2007 is made in respect of a manufactured overseas dividend that is treated as paid under section 925A of ITA 2007 (creditor repos).

(3) The amount mentioned in section 792(3)(b) is—

(a) if subsection (4) applies, the amount deducted under section 922(2) of ITA 2007,

(b) if subsection (5) applies—

(i) the amount deducted under section 922(2) of ITA 2007, less

(ii) the excess mentioned in subsection (5)(b), and

(c) in any other case, nil.

(4) This subsection applies if—

(a) an amount is actually paid by way of manufactured overseas dividend,

(b) the amount so paid equals the relevant net amount, and

(c) it is reasonable to assume that, in deciding the repurchase price of the securities, no account was taken of the fact that the amount would be so paid.

(5) This subsection applies if—

(a) an amount is actually paid by way of manufactured overseas dividend,

(b) the amount so paid exceeds the relevant net amount, and

(c) it is reasonable to assume that, in deciding the repurchase price of the securities, no account was taken of the fact that the amount would be so paid.

(6) In subsections (4)(b) and (5)(b) “the relevant net amount” means—

(a) the gross amount of the overseas dividend of which the manufactured overseas dividend is representative, less

(b) the amount deducted under section 922(2) of ITA 2007.

(7) In subsections (4)(c) and (5)(c)—

(a) “the securities” refers to the securities in respect of which the overseas dividend of which the manufactured overseas dividend is representative is paid, and

(b) the references to the repurchase price of those securities are to the price at which the payer of the manufactured overseas dividend is entitled or obliged to sell the securities, or similar securities, to the recipient of the manufactured overseas dividend.

794 Company receiving manufactured overseas dividend from foreign payer

(1) This section applies if—

(a) a person pays a manufactured overseas dividend,

(b) section 923(1) of ITA 2007 (foreign payers of manufactured overseas dividends: the reverse charge) applies, and

(c) the amount of income tax required to be accounted for and paid under that section has been accounted for and paid.

(2) Subsections (3) and (4) 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).

(3) 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 accounted for and paid as a result of section 923 of ITA 2007.

(4) The amount mentioned in subsection (3)(b) is accordingly to be treated as an amount withheld on account of overseas tax instead of as an amount on account of income tax.

(5) 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).

795 Exemption of manufactured overseas dividends

(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.

(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.