The Income Tax (Manufactured Overseas Dividends) (Amendment No. 2) Regulations 1996

Amendments to the principal Regulations

4.  After regulation 2A(1) there shall be inserted the following regulation—

“Tax treatment of manufactured overseas dividends paid in connection with loan relationships

2B.— (1) For the purposes of the provisions of the Tax Acts relating to the charge to tax under Schedule D, paragraph 4(2) and (3), and paragraph 5, of Schedule 23A shall not apply to a manufactured overseas dividend paid in the circumstances prescribed in paragraph (2).

(2) The circumstances prescribed are where the manufactured overseas dividend is representative of an overseas dividend on an overseas security that represents a loan relationship.

(3) Where the payer of a manufactured overseas dividend to which paragraph (2) applies is neither a company nor carrying on a trade in circumstances where the manufactured overseas dividend is taken into account in computing the profits of that trade, the manufactured overseas dividend shall be treated, for the purposes of the provisions of the Tax Acts relating to the charge to tax under Schedule D and so far as the payer is concerned, as if the amount paid was an annual payment, within section 349(1) of the Taxes Act(2), but so that no amount is required to be deducted on account of income tax from the amount of the payment, or accounted for under section 350 of that Act(3).

(4) Where the recipient of a manufactured overseas dividend to which paragraph (2) applies is neither a company nor carrying on a trade in circumstances where the manufactured overseas dividend is taken into account in computing the profits of that trade, the manufactured overseas dividend shall be treated, for the purposes of the provisions of the Tax Acts relating to the charge to tax under Schedule D and so far as the recipient is concerned, as an overseas dividend of an amount equal to the amount of the manufactured overseas dividend received by him, but not so as to entitle the recipient to claim relief under Part XVIII of the Taxes Act in respect of any tax attributable to the manufactured overseas dividend received.

(5) For the purposes of paragraph (2), an overseas security shall be taken to represent a loan relationship if a company holding that security would have a loan relationship within the meaning of section 81 of the Finance Act 1996.

(6) References in paragraph (4) to the recipient of a manufactured overseas dividend include references to any person claiming title to the manufactured overseas dividend through or under the recipient.”

(1)

Inserted by S.I. 1995/1324.

(2)

Section 349(1) was amended by Part VIII(22) of Schedule 29 to the Finance Act 1995 and paragraph 5(1) of Schedule 29 to the Finance Act 1996.

(3)

Section 350 was amended by paragraph 8 of Schedule 6 to the Finance Act 1996.