Finance Act 1994

Manufactured dividends

18 (1) Section 737 of the Taxes Act 1988 (manufactured dividends: treatment of tax deducted) shall be amended as follows.

(2) In subsection (3) (cases where section 737(1) does not apply) at the end of paragraph (b) there shall be inserted “or”, and after that paragraph there shall be inserted the following paragraph—

“(c) the manufactured dividend is representative of a foreign income dividend.”

(3) In subsection (6) after the definition of “dividend manufacturing regulations” there shall be inserted the following definition—

““foreign income dividend” shall be construed in accordance with Chapter VA of Part VI;”.

19 In Schedule 23A to the Taxes Act 1988, in paragraph 2 (manufactured dividends on United Kingdom equities) the following sub-paragraphs shall be inserted after sub-paragraph (5)—

“(6) In a case where—

(a) the dividend of which the manufactured dividend is representative is a foreign income dividend, and

(b) the dividend manufacturer is a company resident in the United Kingdom,

the manufactured dividend shall, in addition to being treated as mentioned in sub-paragraph (2) above, be treated for all purposes of the Tax Acts as if it were a foreign income dividend; but in such a case the dividend manufacturer shall not by virtue of sub-paragraph (2) above be liable to pay advance corporation tax in respect of the manufactured dividend.

(7) In a case where—

(a) the dividend of which the manufactured dividend is representative is a foreign income dividend, and

(b) the dividend manufacturer is not a company resident in the United Kingdom (so that, were the dividend of which the manufactured dividend is representative not a foreign income dividend, section 737 would apply in relation to the dividend manufacturer),

in relation to the recipient and all persons claiming title through or under him the manufactured dividend shall, in addition to being treated as mentioned in sub-paragraph (3)(a) above, be treated as if it were a foreign income dividend.

(8) In this paragraph “foreign income dividend” shall be construed in accordance with Chapter VA of Part VI.”