The Manufactured Dividends (Tax) Regulations 1997

Liability for tax where the manufacturer receives the dividend of which the manufactured dividend is representative

5.—(1) Regulation 4(2)(b) shall not apply in any case where the recipient of the manufactured dividend shows that—

(a) the dividend manufacturer was entitled to payment of the dividend of which the manufactured dividend is representative either—

(i) as the holder of the securities concerned, or

(ii) directly or indirectly from a person from whom he acquired those securities, or to whom he transferred them, and who was so entitled as the holder of those securities, and

(b) the aggregate of the amount of the dividend received by the dividend manufacturer and any amount paid to him in respect of a tax credit in relation to that dividend (“the aggregate amount”) does not exceed the amount of the dividend.

(2) Where paragraph (1) applies, the dividend manufacturer concerned shall be liable for tax, in respect of the manufactured dividend paid by him, in an amount equal to the amount (if any) of a tax credit in respect of the dividend received by him which, assuming him to have made a claim under arrangements having effect by virtue of section 788, the dividend manufacturer is entitled to have paid to him in respect of the dividend received by him.

(3) The amount of tax for which the dividend manufacturer is liable shall be set against the amount of the tax credit to which, on the assumption made in paragraph (2), he is entitled as mentioned in that paragraph.

(4) Where paragraph (1) does not apply by reason only of the fact that sub-paragraph (b) of that paragraph does not apply, the amount of tax for which the recipient of the manufactured dividend shall be liable to account under paragraph 2(3) of Schedule 23A shall be reduced to an amount equal to the amount by which the aggregate amount exceeds the amount of the dividend.