The Income Tax (Manufactured Overseas Dividends) Regulations 1993

Prospective

Explanatory Note

(This note is not part of the Regulations)

These Regulations, which come into force on 1st October 1993, are made under provisions in Schedule 23A to the Income and Corporation Taxes Act 1988 (“Schedule 23A”). Schedule 23A was inserted by section 58 of, and Schedule 13 to, the Finance Act 1991. The Regulations contain provisions which apply to manufactured overseas dividends in respect of overseas securities as those terms are defined in Schedule 23A.

Regulation 1 provides for citation and commencement, and regulation 2 contains definitions.

Regulation 3 prescribes the rates of relevant withholding tax which are to apply in relation to manufactured overseas dividends.

Regulation 4 provides that in certain circumstances approved manufactured overseas dividends paid to approved United Kingdom intermediaries or approved United Kingdom collecting agents may be paid without deduction of tax but that, subject to certain exceptions, such persons shall account for tax on those manufactured overseas dividends received by them.

Regulation 5 provides that manufactured overseas dividends paid by approved United Kingdom intermediaries to persons beneficially entitled who are resident outside the United Kingdom may be paid without deduction of tax in certain circumstances.

Regulation 6 provides for the retention and keeping of records of notices given under regulation 4 or 5, and enables the Board of Inland Revenue (“the Board”) to require an issuer of such notices who fails to keep records of them to carry out an audit of manufactured overseas dividends received by him and to account for any tax which should have been deducted from such manufactured overseas dividends under paragraph 4(2) of Schedule 23A.

Regulation 7 provides that in certain circumstances a recipient resident in the United Kingdom of manufactured overseas dividends paid by a person not resident in the United Kingdom need not account for tax in respect of the dividends as required by paragraph 4(3) of Schedule 23A, but that he may be required by the Board to carry out an audit of such dividends received by him and to account for any tax due under paragraph 4(3) if he fails to keep records of dividends received or paid by him.

Regulation 8 provides that a manufactured overseas dividend to which regulation 4, 5 or 7 applies shall be treated in relation to the recipient of the payment as if it were an overseas dividend.

Regulation 9 provides that an approved United Kingdom intermediary shall be entitled to set off tax on overseas dividends and manufactured overseas dividends received by him in any chargeable period against tax on approved manufactured overseas dividends paid by him in that period and to account to the Board for, or as the case may be, claim credit in respect of, the balance, except that the entitlement to set off does not apply in the case of certain overseas dividends and manufactured overseas dividends which can be matched against, or identified with, each other under regulation 10.

Regulation 10 sets out the rules for determining whether overseas dividends and manufactured overseas dividends fall to be matched against each other, and provides for the forwarding of tax vouchers relating to overseas dividends matched against manufactured overseas dividends.

Regulation 11 makes provision for the payment of tax pursuant to paragraph 4(2) or (3) of Schedule 23A, or under these Regulations, and provides for the making of returns, and for the assessment and recovery of tax due.

Regulations 12 and 13 provide for the tax treatment of manufactured overseas dividends which are representative of foreign dividends, interest on quoted Eurobonds, or overseas public revenue dividends, and for accounting for tax in respect of such manufactured overseas dividends.

Regulation 14 provides for the keeping of records by overseas dividend manufacturers and approved United Kingdom collecting agents in respect of certain manufactured overseas dividends paid without deduction of tax, and for the carrying out of an audit of such manufactured overseas dividends in the event of a failure to keep records as required.

Regulation 15 provides for the furnishing of vouchers by overseas dividend manufacturers and approved United Kingdom collecting agents to the recipients of manufactured overseas dividends which are paid under deduction of tax or in respect of which tax has been accounted for and paid.

Regulation 16 applies with modifications the information powers conferred on the Board by section 21 of the Taxes Management Act 1970 to businesses carried on by approved United Kingdom intermediaries and approved United Kingdom collecting agents.