(1)In subsection (1) of section 1A of the Taxes Act 1988 (rate of income tax applicable to income from savings and distributions), for “and 686,” there shall be substituted “, 686 and 720(5),”.
(2)In subsection (2) of that section, after paragraph (a) there shall be inserted the following paragraph—
“(aa)any amount chargeable to tax under Case VI of Schedule D by virtue of section 714, 716 or 723;”
(3)Subsections (1) and (2) above apply for the year 1998-99 and subsequent years of assessment.
(1)Section 471 of the Taxes Act 1988 (exchange of securities in connection with conversion operations, nationalisation etc.) shall cease to have effect.
(2)Section 472 of that Act (distribution of securities issued in connection with nationalisation etc.) shall cease to have effect.
(3)Subsection (1) above applies in relation to exchanges made after the day on which this Act is passed.
(4)Subsection (2) above applies in relation to issues of securities occurring after that day.
(1)In section 231 of the Taxes Act 1988 (tax credits for certain recipients of qualifying distributions) in subsection (1), after “Subject to sections” there shall be inserted “231AA,” and after that section there shall be inserted—
(1)A person shall not be entitled to a tax credit under section 231 in respect of a qualifying distribution if—
(a)he is the borrower under a stock lending arrangement or the interim holder under a repurchase agreement;
(b)the qualifying distribution is, or is a payment representative of, a distribution in respect of securities to which the arrangement or agreement relates; and
(c)a manufactured dividend representative of that distribution is paid by that person in respect of securities to which the arrangement or agreement relates.
(2)In this section “stock lending arrangement” has the same meaning as in section 263B of the 1992 Act and, in relation to any such arrangement, any reference to the borrower, or the securities to which the arrangement relates, shall be construed accordingly.
(3)For the purposes of this section the cases where there is a repurchase agreement are the following—
(a)any case falling within subsection (1) of section 730A; and
(b)any case which would fall within that subsection if the sale price and the repurchase price were different;
and, in any such case, any reference to the interim holder, or the securities to which the agreement relates, shall be construed accordingly.
(4)For the purposes of this section “manufactured dividend” has the same meaning as in paragraph 2 of Schedule 23A (and any reference to a manufactured dividend being paid accordingly includes a reference to a payment falling by virtue of section 736B(2) or 737A(5) to be treated for the purposes of Schedule 23A as if it were made).”
(2)In section 231 of the Taxes Act 1988, in subsection (1), after “231AA,” there shall be inserted “231AB,” and after section 231AA of that Act there shall be inserted—
(1)A person shall not be entitled to a tax credit under section 231 in respect of a qualifying distribution if—
(a)he is the original owner under a repurchase agreement;
(b)the qualifying distribution is a manufactured dividend paid to that person by the interim holder under the repurchase agreement in respect of securities to which the agreement relates; and
(c)the repurchase agreement is not such that the actual dividend which the manufactured dividend represents is receivable otherwise than by the original owner.
(2)For the purposes of this section the cases where there is a repurchase agreement are the following—
(a)any case falling within subsection (1) of section 730A; and
(b)any case which would fall within that subsection if the sale price and the repurchase price were different;
and, in any such case, any reference to the original owner, the interim holder, or the securities to which the agreement relates, shall be construed accordingly.
(3)Subsection (4) of section 231AA applies for the purposes of this section as it applies for the purposes of that section.”
(3)In section 737D of the Taxes Act 1988 (power by regulations to provide for manufactured payments to be eligible for relief) in subsection (2) (which defines manufactured payment as any manufactured dividend etc) the words “manufactured dividend” shall cease to have effect.
(4)Schedule 23A to the Taxes Act 1988 (manufactured dividends and interest) shall be amended in accordance with subsections (5) to (8) below.
(5)In paragraph 2 (UK equities) for sub-paragraph (2) there shall be substituted—
“(2)Where a manufactured dividend is paid by a dividend manufacturer who is a company resident in the United Kingdom, the 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; and
(b)in relation to the dividend manufacturer, as if the amount paid were a dividend of his.”
(6)In paragraph 2(3) (manufactured dividends to which paragraph 2(2) does not apply) paragraph (a) (duty to account for notional ACT) shall cease to have effect.
(7)In paragraph 2(6) (written statement in respect of certain manufactured dividends) in paragraph (a), after “a dividend manufacturer pays a manufactured dividend” there shall be inserted “to which sub-paragraph (3) above applies”.
(8)In consequence of subsection (6) above, the following provisions shall also cease to have effect—
(a)in paragraph 2, sub-paragraphs (4) and (5) and, in sub-paragraph (6), paragraph (b) and the word “and” immediately preceding it; and
(b)in paragraph 2A (deductibility of manufactured payment in the case of the manufacturer) in sub-paragraph (1), the words “together with an amount equal to the notional ACT” and sub-paragraph (3).
(9)Subsection (1) above has effect in relation to qualifying distributions made on or after 8th April 1998 if the manufactured dividend representative of the distribution is paid (or treated for the purposes of Schedule 23A to the Taxes Act 1988 as paid) on or after 6th April 1999.
(10)Subsections (2) to (8) above have effect in relation to manufactured dividends paid (or treated for the purposes of Schedule 23A to the Taxes Act 1988 as paid) on or after 6th April 1999.