Income Tax Act 2007

602 Deemed manufactured payments: repos

(1) If this section applies, the rules about manufactured payments apply as if the person from whom the securities are to be repurchased (“A”)—

(a) were required, under the repo, to pay the repurchaser an amount representative of the distribution, and

(b) discharged the requirement when the repurchase price of the securities became due.

(2) The amount mentioned in subsection (1)(a) is—

(a) in the case of a dividend on UK shares (other than one within paragraph (b)), the amount of the dividend,

(b) in the case of a dividend on UK shares so far as—

(i) paid by a company to which Part 4 of FA 2006 applies in respect of profits of C (tax-exempt), or

(ii) paid by a group to which that Part applies in respect of profits of G (property rental business),

the gross amount of the dividend,

(c) in the case of a periodical payment of interest on UK securities, the gross amount of the periodical payment of interest, and

(d) in the case of an overseas dividend on overseas securities, the gross amount of the overseas dividend.

(3) But if A is not the person to whom the original owner agreed to sell the securities, A is not entitled (whether as a result of the rules about manufactured payments or otherwise) to an income deduction as a result of subsection (1).

(4) “Income deduction” means—

(a) a deduction in calculating profits or gains for income tax purposes, or

(b) a deduction in calculating net income.