SCHEDULES
F2F2F1Schedule 23A
Sch. 23A inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 58, Sch. 13 para. 1 (with effect as mentioned in s. 58(3) in relation to payments made on or after such day as may be specified: 26.2.1992 specified for certain purposes by S.I. 1992/173, reg.2; 30.6.1992 specified for certain purposes by S.I. 1992/1346, regs.2, 3, 4; 21.4.1993 specified for certain purposes by S.I. 1993/933, regs.2, 3(b), 4)
Interpretation
F31
1
In this Schedule—
F4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
“dividend manufacturer” has the meaning given by paragraph 2(1) below;
“dividend manufacturing regulations” means regulations made by the Treasury under this Schedule;
F6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
“manufactured dividend” F10. . . and “manufactured overseas dividend” shall be construed respectively in accordance with paragraphs 2 F10. . . and 4 below, as shall references to the gross amount thereof;
F11“manufactured interest” means an amount—
- a
which is representative of a periodical payment of interest on United Kingdom securities, and
- b
which, under a contract or other arrangements for the transfer of the securities, one of the parties is required to pay to the other;
- a
F4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
“overseas dividend” means any interest, dividend or other annual payment payable in respect of any overseas securities;
“overseas dividend manufacturer” has the meaning given by paragraph 4(1) below;
“overseas securities” means—
“overseas tax” means tax under the law of a territory outside the United Kingdom;
“overseas tax credit” means any such credit under the law of a territory outside the United Kingdom in respect of overseas tax as corresponds to a tax credit;
“prescribed” means prescribed in dividend manufacturing regulations;
F4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
“securities” includes any loan stock or similar security;
“transfer” includes any sale or other disposal;
F4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
“United Kingdom equities” means shares of any company resident in the United Kingdom;
“United Kingdom securities” means securities of the government of the United Kingdom, of any public or local authority in the United Kingdom or of any company or other body resident in the United Kingdom, but does not include F8. . . United Kingdom equities.
2
F5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F28 Manufactured dividends on UK equities: general
Sch. 23A paras. 2-2B and cross-headings substituted for Sch. 23A para. 2 and cross-heading (with effect in accordance with Sch. 10 para. 16 of the amending Act) by Finance Act 1997 c. 16, Sch. 10 para. 10(1)
F13F12C12
1
This paragraph applies in any case where, under a contract or other arrangements for the transfer of United Kingdom equities, one of the parties (a “dividend manufacturer”) is required to pay to the other (“the recipient”) an amount (a “manufactured dividend”) which is representative of a dividend on the equities.
F251A
Sub-paragraphs (1C) to (1E) apply where—
a
a manufactured dividend is paid by a dividend manufacturer, and
b
the dividend of which the manufactured dividend is representative is taxable.
1B
For this purpose a dividend is “taxable” if—
a
it is received by the dividend manufacturer and the charge to corporation tax on income applies to it, or
b
it is received by a person other than the dividend manufacturer and the charge to corporation tax on income would have applied to it if it had been received by the dividend manufacturer.
1C
Where the dividend manufacturer carries on a trade to which the manufactured dividend relates, and neither sub-paragraph (1D) nor (1E) applies, the manufactured dividend is to be treated as an expense of the trade.
1D
Where the dividend manufacturer has investment business to which the manufactured dividend relates, the manufactured dividend is to be treated as expenses of management of the business for the purposes of Part 16 of CTA 2009.
1E
Where the dividend manufacturer carries on life assurance business to which the manufactured dividend relates, the manufactured dividend is to be treated as if, to the extent that it is referable to basic life assurance and general annuity business, it were an expense payable falling to be brought into account at step 3 of section 76(7).
1F
For the purposes of sub-paragraph (1E), the manufactured dividend is to be treated as referable to basic life assurance and general annuity business to the extent that the dividend of which it is representative—
a
is received by the dividend manufacturer and is so referable by virtue of section 432A, or
b
is received by a person other than the dividend manufacturer, and would have been so referable by virtue of section 432A if it had it been received by the dividend manufacturer.
F152
Where a manufactured dividend is paid by a dividend manufacturer who is a company resident in the United Kingdom, the F19Corporation Tax Acts shall have effect—
a
in relation to the recipient, and persons claiming title through or under him, as if the manufactured dividend were a dividend on the UK equities in question; F26. . .
b
F26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
Where a manufactured dividend to which sub-paragraph (2) above does not apply is paid by any person—
a
F16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b
c
F21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F273A
In its application in relation to a manufactured dividend by virtue of sub-paragraph (2) or (3), Part 9A of CTA 2009 (company distributions) has effect subject to the following modification.
3B
The modification is that—
a
the definition of “the payer” in section 931T is to be treated as omitted, and
b
references in that Part to the payer are to be treated as references to the company that pays the dividend of which the manufactured dividend is representative.
4
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F175
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F176
F14. . . Where—
aa
the dividend manufacturer is a non-UK resident company within the charge to corporation tax,
F18b
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the dividend manufacturer shall, on paying the manufactured dividend, provide the recipient with a statement in writing setting out the matters specified in sub-paragraph (7) below.
7
Those matters are—
a
the amount of the manufactured dividend;
b
the date of the payment of the manufactured dividend; and
c
the amount of the tax credit to which, by virtue of sub-paragraph (3)(b) above F24or section 573(2) of ITA 2007, the recipient or a person claiming title through or under him either—
i
is entitled in respect of the manufactured dividend, or
ii
would be so entitled were all the conditions of a right to a tax credit satisfied, in the case of the recipient or that person, as respects the dividend which the recipient is deemed to receive.
8
The duty imposed by sub-paragraph (6) above shall be enforceable at the suit or instance of the recipient.
Deductibility of manufactured payment in the case of the manufacturer
2A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F106. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufactured dividends representative of foreign income dividends
2B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F107. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufactured interest on UK securities: general
3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F108. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufactured interest on gilt-edged securities etc.
3A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F109. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F29Manufactured overseas dividends
Sch. 23A inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 58, Sch. 13 para.1 (with effect as mentioned in s. 58(3) in relation to payments made on or after such day as may be specified: 26.2.1992 specified for certain purposes by S.I. 1992/173, reg.2; 30.6.1992 specified for certain purposes by S.I. 1992/1346, regs.2, 3, 4; 21.4.1993 specified for certain purposes by S.I. 1993/933, regs.2, 3(b), 4)
F30C34
C21
This paragraph applies in any case where, under a contract or other arrangements for the transfer of overseas securities, one of the parties (the “overseas dividend manufacturer”) is required to pay to the other (“the recipient”) an amount representative of an overseas dividend on the overseas securities; and in this Schedule the “manufactured overseas dividend” means any payment which the overseas dividend manufacturer makes in discharge of that requirement.
F37F531A
Sub-paragraphs (1C) to (1E) apply where the overseas dividend of which the manufactured overseas dividend is representative is taxable.
1B
For this purpose an overseas dividend is “taxable” if—
a
it is received by the overseas dividend manufacturer and the charge to corporation tax on income applies to it, or
b
it is received by a person other than the overseas dividend manufacturer and the charge to corporation tax on income would have applied to it if it had been received by the overseas dividend manufacturer.
1C
Where the overseas dividend manufacturer carries on a trade to which the manufactured overseas dividend relates, and neither sub-paragraph (1D) nor (1E) applies, the manufactured overseas dividend is to be treated as an expense of the trade.
1D
Where the overseas dividend manufacturer has investment business to which the manufactured overseas dividend relates, the manufactured overseas dividend is to be treated as expenses of management of the business for the purposes of Part 16 of CTA 2009.
1E
Where the overseas dividend manufacturer carries on life assurance business to which the manufactured overseas dividend relates, the manufactured overseas dividend is to be treated as if, to the extent that it is referable to basic life assurance and general annuity business, it were an expense payable falling to be brought into account at step 3 of section 76(7).
1F
For the purposes of sub-paragraph (1E), the manufactured overseas dividend is to be treated as referable to basic life assurance and general annuity business to the extent that the overseas dividend of which it is representative—
a
is received by the overseas dividend manufacturer and is so referable by virtue of section 432A, or
b
is received by a person other than the dividend manufacturer, and would have been so referable by virtue of section 432A if it had it been received by the dividend manufacturer.
2
F39. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F382A
F39. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
F39. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F323A
F39. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3B
F39. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Where a manufactured overseas dividend is paid after deduction of the amount required by F40section 922(2) of ITA 2007 (amount of income tax to be deducted at source), or where the amount of tax required under F41section 923 of that Act (income tax to be accounted for and paid) in respect of such a dividend has been accounted for and paid, then for all purposes of the F42Corporation Tax ActsF43. . . —
a
the manufactured overseas dividend shall be treated in relation to the recipient, and all F44companies claiming title through or under F44the recipient, as if it were an overseas dividend of an amount equal to the gross amount of the manufactured overseas dividend, but paid after the withholding therefrom, on account of overseas tax, of F54the relevant amount in relation to the amount deducted under section 922(2) of ITA 2007 or the whole of the amountF50accounted for and paid under section 923 of that Act; and
b
F55the relevant amount in relation to the amount so deducted or the whole of the amountF51so accounted for and paid shall accordingly be treated in relation to the recipient, and all F45companies claiming title through or under F45the recipient, as an amount so withheld instead of as an amount on account of income tax.
F56For the meaning of references in this paragraph to the relevant amount in relation to an amount deducted under section 922(2) of ITA 2007, see paragraph 4A.
F574A
In its application in relation to a manufactured overseas dividend by virtue of sub-paragraph (4), Part 9A of CTA 2009 (company distributions) has effect—
a
as if the manufactured overseas dividend were an overseas dividend on the overseas securities in question, and
b
subject to the following modification.
4B
The modification is that—
a
the definition of “the payer” in section 931T is to be treated as omitted, and
b
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.
5
For the purposes of this paragraph—
a
F46. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b
the gross amount of a manufactured overseas dividend is an amount equal to the gross amount of that overseas dividend of which the manufactured overseas dividend is representative, as mentioned in sub-paragraph (1) above; and
c
the gross amount of an overseas dividend is an amount equal to the aggregate of—
i
so much of the overseas dividend as remains after the deduction of the overseas tax (if any) chargeable on it;
ii
the amount of the overseas tax (if any) so deducted; and
iii
the amount of the overseas tax credit (if any) in respect of the overseas dividend.
6
F47. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
F48. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F337AA
F48. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F317A
F34. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
F36. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F359
4A
1
A reference in paragraph 4(4)(a) or (b) to the relevant amount in relation to an amount deducted under section 922(2) of ITA 2007 is—
a
where the deduction is made in respect of a manufactured overseas dividend that is treated as paid under paragraph 13(1) of Schedule 13 to FA 2007 (sale and repurchase of securities), to amount A, and
b
otherwise, to the amount deducted under section 922(2) of ITA 2007.
2
Amount A is—
a
in a case to which sub-paragraph (3) applies, the amount deducted under section 922(2) of ITA 2007,
b
in a case to which sub-paragraph (4) applies—
i
the amount deducted under section 922(2) of ITA 2007, less
ii
the excess mentioned in that sub-paragraph, and
c
in any other case, nil.
3
This sub-paragraph applies to a case in which—
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.
4
This sub-paragraph applies to a case in which—
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.
5
In this paragraph “the repurchase price” of the securities means 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.
6
In this paragraph “the securities” means the securities in respect of which the overseas dividend of which the manufactured overseas dividend is representative is paid.
7
In this paragraph “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.
F58Dividends and interest passing through the market
Sch. 23A inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 58, Sch. 13 para.1 (with effect as mentioned in s. 58(3) in relation to payments made on or after such day as may be specified: 26.2.1992 specified for certain purposes by S.I. 1992/173, reg.2; 30.6.1992 specified for certain purposes by S.I. 1992/1346, regs.2, 3, 4; 21.4.1993 specified for certain purposes by S.I. 1993/933, regs. 2, 3(b),4)
F595. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F60. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F61Unapproved manufactured payments
Sch. 23A inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 58, Sch. 13 para.1 (with effect as mentioned in s. 58(3) in relation to payments made on or after such day as may be specified: 26.2.1992 specified for certain purposes by S.I. 1992/173, reg.2; 30.6.1992 specified for certain purposes by S.I. 1992/1346, regs.2, 3, 4; 21.4.1993 specified for certain purposes by S.I. 1993/933, regs.2, 3(b), 4)
F626. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F63. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F64Irregular manufactured payments
Sch. 23A inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 58, Sch. 13 para.1 (with effect as mentioned in s. 58(3) in relation to payments made on or after such day as may be specified: 26.2.1992 specified for certain purposes by S.I. 1992/173, reg.2; 30.6.1992 specified for certain purposes by S.I. 1992/1346, regs.2, 3, 4; 21.4.1993 specified for certain purposes by S.I. 1993/933, regs.2, 3(b), 4)
F657
1
F67. . . In any case where (apart from this paragraph)—
a
an amount paid by way of manufactured dividend would exceed the amount of the dividend of which it is representative, or
b
the aggregate of—
i
an amount paid by way of F73. . . manufactured overseas dividend, and
ii
the tax required to be accounted for in connection with the making of that payment,
the payment shall, to the extent of an amount equal to the excess, not be regarded for the purposes of this Schedule as made in discharge of the requirement referred to in paragraph 2(1)F77. . . or 4(1) above, as the case may be, but shall instead to that extent be taken for all purposes of the F78Corporation Tax Acts to constitute a separate fee for entering into the contract or other arrangements under which it was made, F72notwithstanding anything in F79paragraph 2 above or anything in paragraph 4 other than in sub-paragraph (1A).
F661A
2
F68. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
For the purpose of giving relief under any provision of the F81Corporation Tax Acts in a case falling within paragraph F82. . . 4(1) above where (apart from this paragraph) the aggregate referred to in sub-paragraph (1)(b) above would be less than the gross amount there mentioned—
a
b
F70. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
In this paragraph “relief” means relief by way of—
a
deduction in computing profits or gains; or
Manufactured payments under arrangements having an unallowable purpose
7A
1
This paragraph applies in any case where—
a
a manufactured payment falls to be made by a company in an accounting period in pursuance of any arrangements (see sub-paragraphs (9) and (10) for definitions), and
b
the arrangements have an unallowable purpose at any time (see sub-paragraphs (3) to (5)).
But this is subject to sub-paragraph (8) below (cases where tax relief is denied apart from this paragraph).
2
The company is not entitled, by virtue of anything in this Schedule or any provision of regulations under it, or otherwise, to any relevant tax relief (see sub-paragraph (10)), to the extent that the relief is in respect of, or referable to, the whole or any part of so much of the manufactured payment as, on a just and reasonable apportionment, is attributable to the unallowable purpose.
3
Arrangements have an unallowable purpose at any time if at that time the purposes for which the company is a party to—
a
the arrangements,
b
any related transaction (see sub-paragraphs (6) and (7)), or
c
any transaction in pursuance of the arrangements,
include a purpose (“the unallowable purpose”) which is not among the business or other commercial purposes of the company.
4
The business and other commercial purposes of a company do not include the purposes of any part of its activities in respect of which it is not within the charge to corporation tax.
5
Where one of the purposes for which a company is at any time a party to—
a
any arrangements,
b
any related transaction in the case of any arrangements, or
c
any transaction in pursuance of any arrangements,
is a tax avoidance purpose, that purpose shall be taken to be a business or other commercial purpose of the company only where it is not the main purpose, or one of the main purposes, for which the company is party to the arrangements or transaction at that time.
6
One or more transactions are to be regarded as related transactions, in the case of any arrangements, if it would be reasonable to assume, from either or both of—
a
the likely effect of the transactions, and
b
the circumstances in which the transactions are entered into or effected,
that none of the transactions would have been entered into or effected independently of the arrangements.
7
Transactions are not prevented from being related transactions, in the case of any arrangements, just because the transactions—
a
are not between the same parties, or
b
are not between the parties to the arrangements.
8
This paragraph does not apply if, as a result of any of the following provisions—
a
F112section 1219(2)(b) of CTA 2009 (expenses of management of companies with investment business: unallowable purposes),
b
section 76(4)(d) (expenses of insurance companies: unallowable purposes),
c
F113section 441 of CTA 2009 (loan relationships with unallowable purposes),
the company in question is not entitled to a relevant tax relief in respect of, or referable to, the whole or any part of the manufactured payment.
F114The reference to section 76 is a reference to that section as it has effect in relation to accounting periods beginning on or after 1st April 2004.
9
Any reference in this paragraph to a manufactured payment falling to be made by a company includes a reference to a manufactured payment which is deemed by or under any provision of the Tax Acts to be made by a company (and references to a transaction, or to a company being party to a transaction, are to be construed accordingly).
10
In this paragraph—
“arrangements” includes schemes, arrangements and understandings of any kind, whether or not legally enforceable, and shall be taken to include any related transactions;
“manufactured payment” means any of the following—
- a
any manufactured dividend;
- b
any manufactured interest;
- c
any manufactured overseas dividend;
- d
F111any payment which by virtue of paragraph 7(1) constitutes a fee;
- a
“related transaction” shall be construed in accordance with sub-paragraphs (6) and (7) above;
“relevant tax relief” means any of the following—
- a
any deduction in computing profits or gains for the purposes of corporation tax;
- b
any deduction against total profits;
- c
the bringing into account of any debit for the purposes of F115Part 5 of CTA 2009 (loan relationships);
- d
the surrender of an amount by way of group relief;
- a
F110“tax advantage” has the meaning given by section 840ZA;
“tax avoidance purpose” means any purpose that consists in securing a tax advantage (whether for the company in question or any other person);
and sub-paragraphs (3) to (7) above have effect for the purposes of this paragraph.
F87Dividend manufacturing regulations: general
Sch. 23A inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 58, Sch. 13 para.1 (with effect as mentioned in s. 58(3) in relation to payments made on or after such day as may be specified: 26.2.1992 specified for certain purposes by S.I. 1992/173, reg.2; 30.6.1992 specified for certain purposes by S.I. 1992/1346, regs.2, 3, 4; 21.4.1993 specified for certain purposes by S.I. 1993/933, regs.2, 3(b), 4)
F888
1
Dividend manufacturing regulations may make provision for—
a
such manufactured dividends F94. . . or manufactured overseas dividends as may be prescribed,
F89aa
such persons who receive, or become entitled to receive, manufactured dividends F94. . . or manufactured overseas dividends as may be prescribed, or
b
such dividend manufacturers F95. . . or overseas dividend manufacturers as may be prescribed,
F901A
Dividend manufacturing regulations may provide, in relation to prescribed cases where a person makes or receives the payment of any amount representative of an overseas dividend, or is treated for any purposes of this Schedule or such regulations as a person making or receiving such a payment—
a
for any entitlement of that person to claim relief under Part XVIII to be extinguished or reduced to such extent as may be found under the regulations; and
b
for the adjustment, by reference to any provision having effect under the law of a territory outside the United Kingdom, of any amount falling to be taken, for any prescribed purposes of the F98Corporation Tax Acts F99. . . , to be the amount paid or payable by or to any person in respect of any sale, repurchase or other transfer of the overseas securities to which the payment relates.
2
Dividend manufacturing regulations may make provision with respect to—
a
the accounts and other records which are to be kept,
b
the vouchers which are to be issued or produced,
c
F100. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
d
F100. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F932A
F103. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
Dividend manufacturing regulations may—
a
make provision for prescribed provisions of the Management Act to apply F104for corporation tax purposes in relation to manufactured dividends, manufactured interest or manufactured overseas dividends with such modifications, specified in the regulations, as the Treasury think fit;
b
F105. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Dividend manufacturing regulations may make different provision for different cases.
Sch. 23A repealed (1.4.2010 with effect in accordance with s. 1184(1) of the repealing Act) by Corporation Tax Act 2010 (c. 4), Sch. 1 para. 145, Sch. 3 Pt. 1 (with Sch. 2)