Finance Act 1996

159Manufactured payments, repos, etc

(1)Sections 729, 737A(2)(b) and 786(4) of the Taxes Act 1988 (provisions applying to sale and repurchase agreements) shall cease to have effect except in relation to cases where the initial agreement to sell or transfer the securities or other property was made before the appointed day.

(2)In section 737 of that Act—

(a)in subsection (5) (manufactured dividends paid to UK residents by non-residents), for the words from “a person resident in the United Kingdom” to “the United Kingdom recipient shall” there shall be substituted “a United Kingdom recipient, that recipient shall”; and

(b)after that subsection there shall be inserted the following subsection—

“(5AAA)For the purposes of subsection (5) above a person who receives a manufactured dividend is a United Kingdom recipient if—

(a)he is resident in the United Kingdom; or

(b)he is not so resident but receives that dividend for the purposes of a trade carried on through a branch or agency in the United Kingdom.”

(3)In section 737C of that Act (deemed manufactured payments), the following subsection shall be inserted after subsection (11A) in relation to cases where the initial agreement to sell the securities is made on or after the appointed day, that is to say—

“(11B)The preceding provisions of this section shall have effect in cases where paragraph 2, 3 or 4 of Schedule 23A would apply by virtue of section 737A(5) but for paragraph 5 of that Schedule as they have effect in a case where the paragraph in question is not disapplied by paragraph 5; and where—

(a)the gross amount of the deemed manufactured interest, or

(b)the gross amount of the deemed manufactured overseas dividend,

falls to be calculated in such a case under subsection (8) or (11) above, it shall be so calculated by reference to the provisions of paragraph 3 or 4 of Schedule 23A that would have applied but for paragraph 5 of that Schedule.”

(4)In sub-paragraph (3) of paragraph 4 of Schedule 23A to that Act (manufactured overseas dividends paid to UK residents by non-residents), for the words from “a person resident in the United Kingdom” to “the United Kingdom recipient shall” there shall be substituted “a United Kingdom recipient, that recipient shall”.

(5)After that sub-paragraph there shall be inserted the following sub-paragraphs—

“(3A)For the purposes of sub-paragraph (3) above a person who receives a manufactured overseas dividend is a United Kingdom recipient if—

(a)he is resident in the United Kingdom; or

(b)he is not so resident but receives that dividend for the purposes of a trade carried on through a branch or agency in the United Kingdom.

(3B)Dividend manufacturing regulations may make provision, in relation to cases falling within sub-paragraph (3) above, for the amount of tax required under that sub-paragraph to be taken to be reduced, to such extent and for such purposes as may be determined under the regulations, by reference to amounts of overseas tax charged on, or in respect of—

(a)the making of the manufactured overseas dividend; or

(b)the overseas dividend of which the manufactured overseas dividend is representative.”

(6)In sub-paragraph (7) of paragraph 4 of that Schedule (regulations for off-setting), for the words from “against” to “and account” in the words after paragraph (b) there shall be substituted “in accordance with the regulations and to the prescribed extent, amounts falling within paragraph (a) of sub-paragraph (7AA) below against the sums falling within paragraph (b) of that sub-paragraph, and to account”; and after that sub-paragraph there shall be inserted the following sub-paragraph—

“(7AA)Those amounts and sums are—

(a)amounts of overseas tax in respect of overseas dividends received by him in that chargeable period, amounts of overseas tax charged on, or in respect of, the making of manufactured overseas dividends so received by him and amounts deducted under sub-paragraph (2) above from any such manufactured overseas dividends; and

(b)the sums due from him on account of the amounts deducted by him under sub-paragraph (2) above from the manufactured overseas dividends paid by him in that chargeable period.”

(7)In sub-paragraph (1) of paragraph 8 of that Schedule (power to modify provisions of Schedule)—

(a)before the “or” at the end of paragraph (a) there shall be inserted—

“(aa)such persons who receive, or become entitled to receive, manufactured dividends, manufactured interest or manufactured overseas dividends as may be prescribed,”

and

(b)in the words after paragraph (b), for “paragraph 2, 3 or 4 above” there shall be substituted “paragraphs 2 to 5 above”.

(8)After sub-paragraph (1) of paragraph 8 of that Schedule there shall be inserted the following sub-paragraph—

“(1A)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 Tax Acts or the 1992 Act, 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.”

(9)Subsections (2), (4) and (5) above have effect—

(a)for the purposes of corporation tax, in relation to accounting periods ending after 31st March 1996; and

(b)for the purposes of income tax, in relation to the year 1996-97 and subsequent years of assessment.

(10)In this section “the appointed day” means such day as the Treasury may by order appoint, and different days may be appointed under this subsection for different purposes.