INCOME TAX Citation and commencement 1 These Regulations may be cited as the Income Tax (Manufactured Overseas Dividends) Regulations 1993 and shall come into force on 1st October 1993. Interpretation 2 1 In these Regulations unless the context otherwise requires– ... “approved United Kingdom collecting agent” means a person who is a collecting agent ... and who is resident in the United Kingdom or, if not so resident, is carrying on a trade in the United Kingdom through a permanent establishment and who is approved by the Board for the purposes of these Regulations ; “approved United Kingdom intermediary” means an overseas dividend manufac– turer who is resident in the United Kingdom or, if not so resident, is carrying on a trade in the United Kingdom through a permanent establishment and who is approved as an intermediary by the Board for the purposes of these Regulations ; “the Board” means the Commissioners of Inland Revenue; “chargeable period” has the meaning given by regulation 2A; “collecting agent” means a person who, in the course of carrying on a trade in the United Kingdom, collects or secures payment of overseas dividends for another person or acts as custodian of any overseas securities; “foreign permanent establishment payment” means a payment made by a company in the course of a trade carried on through a permanent establishment in a territory outside the United Kingdom where section 18A of the Corporation Tax Act 2009 has effect in relation to the company for the accounting period in which the payment is made; “foreign permanent establishment receipt” means a receipt by a company for the purposes of a trade carried on by the company through a permanent establishment in a territory outside the United Kingdom where section 18A of the Corporation Tax Act 2009 has effect in relation to the company for the accounting period in which the payment is received; ... “gross amount of the manufactured overseas dividend” has the meaning given by paragraph 4(5)(b) of Schedule 23A; “gross amount of the overseas dividend” has the meaning given by— section 589(4) of the Income Tax Act 2007 for income tax purposes, and section 813(3) of the Corporation Tax Act 2010 for corporation tax purposes; “the Income Tax Acts” has the meaning given by section 831(1)(b) of the Taxes Act ; “the Management Act ” means the Taxes Management Act 1970 ; “manufactured overseas dividend” shall be construed in accordance with paragraph 4(1) of Schedule 23A; “overseas dividend”, “overseas dividend manufacturer”, “overseas securities”, “overseas tax” and “overseas tax credit” have the meanings given by paragraph 1(1) of Schedule 23A; “relevant withholding tax” has the meaning given by paragraph 4(5)(a) of Schedule 23A; “Schedule 23A” means Schedule 23A to the Taxes Act; “the Taxes Act” means the Income and Corporation Taxes Act 1988; “the Tax Acts” has the meaning given by section 831(2) of the Taxes Act; ... “United Kingdom recipient” has the meaning given in section 918(5) and (5A) of the Income Tax Act 2007. 2 References in regulations 3 to 11, 14 and 15 to manufactured overseas dividends do not include references to manufactured overseas dividends to which regulation 2B applies, and references in those regulations to overseas dividends do not include references to any overseas dividend of which a manufactured overseas dividend to which regulation 2B applies would be representative. 3 In these Regulations references to a permanent establishment shall be read, in relation to accounting periods beginning before 1st January 2003, as references to a branch or agency. Chargeable period 2A 1 In these Regulations “chargeable period”— a as respects a company, means its accounting period for the purposes of corporation tax; b as respects a person other than a company who draws up accounts for any period (“the accounts period”), means one of the periods specified in paragraph (2) below. c as respects a person other than a company who does not draw up accounts, means a year of assessment ; 2 The periods specified in this paragraph are— a the period which begins at the beginning of the accounts period and ends at the expiration of 12 months from that date or, if earlier, at the end of the accounts period; b any subsequent period which— i begins at the end of the immediately preceding period, being a period specified in this paragraph, and ii ends at the expiration of 12 months from that date or, if earlier, at the end of the accounts period. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax treatment of manufactured overseas dividends paid in connection with loan relationships 2B 1 For the purposes of the provisions of the Tax Acts relating to the charge to tax under Schedule D, paragraph 4(2) and (3) ..., of Schedule 23A shall not apply to a manufactured overseas dividend paid in the circumstances prescribed in paragraph (2). 2 The circumstances prescribed are where the manufactured overseas dividend is representative of an overseas dividend on an overseas security that represents a loan relationship. 3 Where the payer of a manufactured overseas dividend to which paragraph (2) applies is neither a company nor carrying on a trade in circumstances where the manufactured overseas dividend is taken into account in computing the profits of that trade, the manufactured overseas dividend shall be treated, for the purposes of the provisions of the Tax Acts relating to the charge to tax under Schedule D and so far as the payer is concerned, as if the amount paid was an annual payment, within section 349(1) of the Taxes Act, but so that no amount is required to be deducted on account of income tax from the amount of the payment, or accounted for under section 350 of that Act. 4 Where the recipient of a manufactured overseas dividend to which paragraph (2) applies is neither a company nor carrying on a trade in circumstances where the manufactured overseas dividend is taken into account in computing the profits of that trade, the manufactured overseas dividend shall be treated, for the purposes of the provisions of the Tax Acts relating to the charge to tax under Schedule D and so far as the recipient is concerned, as an overseas dividend of an amount equal to the amount of the manufactured overseas dividend received by him, but not so as to entitle the recipient to claim relief under Part XVIII of the Taxes Act in respect of any tax attributable to the manufactured overseas dividend received. 5 For the purposes of paragraph (2), an overseas security shall be taken to represent a loan relationship if a company holding that security would have a loan relationship within the meaning of section 81 of the Finance Act 1996. 6 References in paragraph (4) to the recipient of a manufactured overseas dividend include references to any person claiming title to the manufactured overseas dividend through or under the recipient. Prescribed rates of relevant withholding tax 3 1 Subject to paragraphs (5) and (6) , the rate of relevant withholding tax which is prescribed in relation to any manufactured overseas dividend is the rate which is equal to the rate (or, if more than one, the highest rate) at which tax would have been payable (and not repayable) under the law of the overseas territory specified in paragraph (3) in respect of– a an overseas dividend paid on the same date that the manufactured overseas dividend is paid to a person who is– i resident in the United Kingdom and not carrying on a trade outside the United Kingdom through a permanent establishment , ii subject to tax under the law of the United Kingdom, and iii not subject to a special relationship with any other person as respects any commercial or financial dealings, in respect of the same kind of overseas securities as those in respect of which the manufactured overseas dividend was paid, and b the overseas tax credit, if any, relating to that overseas dividend. 2 The reference in paragraph (1) above to tax which would have been payable is a reference to tax which would have been eligible for relief either– a pursuant to arrangements made with the government of the overseas territory specified in paragraph (3) which have effect by virtue of section 788 of the Taxes Act and relate to the overseas dividend concerned, or b by virtue of other provisions of Part XVIII of the Taxes Act other than section 790(5)(c)(ii) of that Act. 3 The overseas territory specified in this paragraph is the territory of the government or public or local authority which issued the securities in question or, where the securities were issued by any other body of persons not resident in the United Kingdom, the territory under whose law that tax would have been payable. 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Where the recipient of the manufactured overseas dividend is a company, the reference in paragraph (1) to the highest rate is a reference to the highest rate that would have applied in relation to the overseas dividend specified in paragraph (1)(a) paid to a company which is within paragraphs (i) to (iii) of that paragraph. 6 Where the manufactured overseas dividend— a is paid to, or for the benefit of, a registered pension scheme (within the meaning given in Part 4 of the Finance Act 2004), or b is linked solely to pension business for the purposes of section 438 of the Taxes Act at the time that the payment is made, the reference in paragraph (1) to the highest rate is a reference to the rate that would have been suffered by the recipient in relation to the overseas dividend of which that manufactured overseas dividend is representative. Tax treatment of approved manufactured overseas dividends paid to approved United Kingdom intermediaries or approved United Kingdom collecting agents 4 1 For the purposes of the provisions of the Tax Acts relating to the charge to tax under Schedule D other than paragraph 4(3) of Schedule 23A, a manufactured overseas dividend paid in the circumstances prescribed in paragraph (2)– a shall not be treated as an annual payment pursuant to paragraph 4(2) of Schedule 23A; b shall be paid without deduction of an amount on account of income tax; c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 The circumstances prescribed by this paragraph are where— a a manufactured overseas dividend is paid to an approved United Kingdom intermediary or an approved United Kingdom collecting agent by an overseas dividend manufacturer who— i is resident in the United Kingdom or, if not so resident, makes the payment in the course of a trade which he carries on through a permanent establishment in the United Kingdom, and ii is not an approved United Kingdom intermediary; ... b the manufactured overseas dividend is not representative of the overseas dividend received by the overseas dividend manufacturer , and c the receipt of the manufactured overseas dividend by the approved United Kingdom intermediary or approved United Kingdom collecting agent is not a foreign permanent establishment receipt. 3 Subject to paragraph (4), the approved United Kingdom intermediary or approved United Kingdom collecting agent referred to in paragraph (2) shall account for and pay an amount of tax in respect of the manufactured overseas dividend which he receives equal to that which the maker of the payment would have been required to account for and pay had paragraph 4(2) of Schedule 23A applied to the payment. 4 Paragraph (3) shall not apply where either paragraph (5) or (6) applies. 5 This paragraph applies where the approved United Kingdom intermediary or approved United Kingdom collecting agent pays, in accordance with regulation 5, and without deduction of tax, a manufactured overseas dividend representative of the same overseas dividend as is represented by the manufactured overseas dividend received by him. 6 This paragraph applies where the approved United Kingdom collecting agent is required to pay to an approved United Kingdom intermediary a manufactured overseas dividend representative of the same overseas dividend as is represented by the manufactured overseas dividend received by him and the approved United Kingdom intermediary— a pays as mentioned in paragraph (5) the manufactured overseas dividend, and b issues a notice to the approved United Kingdom collecting agent authorising him to make the payment without deduction of tax. Tax treatment of approved manufactured overseas dividends paid to persons resident outside the United Kingdom 5 1 Subject to paragraph (1A), for the purposes of the provisions of the Tax Acts relating to the charge to tax under Schedule D, a manufactured overseas dividend paid in either of the circumstances prescribed by paragraphs (1B) and (2) shall not be treated as an annual payment pursuant to paragraph 4(2) of Schedule 23A, and accordingly shall be paid without deduction of an amount on account of income tax. 1A Where a manufactured overseas dividend is paid in the circumstances prescribed by paragraph (1B) by a person who is not within the charge to corporation tax and who is not an approved United Kingdom intermediary, the dividend shall be treated, for the purposes of the provisions of the Tax Acts relating to the charge to tax under Schedule D and so far as the payer is concerned, as if the amount paid was an annual payment, within section 349(1) of the Taxes Act, but so that no amount is required to be deducted on account of income tax from the amount of the payment, or accounted for under section 350 of that Act. 1B The circumstances prescribed by this paragraph are where— a a manufactured overseas dividend is paid by a person who is resident in the United Kingdom, or, if not so resident, makes the payment in the course of a trade which he carries on through a permanent establishment in the United Kingdom; b the payment is to or for the benefit of a person beneficially entitled to it who is not a United Kingdom recipient; and c regulation 4(1) does not apply. 2 The circumstances prescribed by this paragraph are where— a a manufactured overseas dividend is paid by an approved United Kingdom intermediary who, if not resident in the United Kingdom, makes the payment in the course of a trade which he carries on through a permanent establishment in the United Kingdom; and b the payment is made to another approved United Kingdom intermediary or to an approved United Kingdom collecting agent as part of a chain of payments where– i each payment in the chain is a payment by an approved United Kingdom intermediary or an approved United Kingdom collecting agent of a manufactured overseas dividend representative of the same overseas dividend, ii the maker of the last payment in the chain, if not resident in the United Kingdom, makes the payment in the course of a trade which he carries on through a permanent establishment in the United Kingdom and makes the payment to or for the benefit of a person beneficially entitled to it who is not a United Kingdom recipient , ... iii each recipient of a payment in the chain , apart from the last, has issued a notice to the maker of the payment authorising him to make the payment without deduction of tax , and iv none of the payments are foreign permanent establishment payments. Chains of payments where last payment made to, or for benefit of, registered pension scheme or is linked solely to pension business 5A 1 This regulation applies where— a a person (the “original payer”) pays a manufactured overseas dividend, and b the payment is made to an approved United Kingdom intermediary or to an approved United Kingdom collecting agent as part of a chain of payments where conditions A to E are met. 2 Condition A is that each payment in the chain, apart from the first, is a payment by an approved United Kingdom intermediary or an approved United Kingdom collecting agent of a manufactured overseas dividend representative of the same overseas dividend. 3 Condition B is that the last payment in the chain— a is made to, or for the benefit of, a registered pension scheme (within the meaning given in Part 4 of the Finance Act 2004), or b is linked solely to pension business for the purposes of section 438 of the Taxes Act at the time that the payment is made. 4 Condition C is that the last payment in the chain is made by a person who— a is resident in the United Kingdom, or b is not resident in the United Kingdom, but makes the payment in the course of a trade carried on through a permanent establishment. 5 Condition D is that each recipient of payment in the chain , apart from the last, has issued a notice to the original payer to make the payment at the applicable rate of relevant withholding tax. 5A Condition E is that none of the payments are foreign permanent establishment payments. 6 The applicable rate of relevant withholding tax for each payment in the chain to an approved United Kingdom intermediary or to an approved United Kingdom collecting agent shall be determined in accordance with paragraphs (7) and (8). 7 If the last payment in the chain is made to, or for the benefit of, a registered pension scheme, the applicable rate shall be determined as if the person to whom the payment is made were the registered pension scheme to which the last payment in the chain is made. 8 If the last payment in the chain is linked solely to pension business at the time that the payment is made, the applicable rate shall be determined as if the person to whom the payment is made were the person to whom the last payment in the chain is made. 9 For the purposes of condition A (see paragraph (2)) it does not matter whether or not the first payment in the chain was made by an approved United Kingdom intermediary or an approved United Kingdom collecting agent. Chains of payments involving central counterparties 5B 1 This regulation applies where— a a person pays a manufactured overseas dividend, and b the payment is made as part of a chain of payments (“a CCP chain”), which may form part of a chain of payments to which regulation 5(2) or 5A applies, where conditions A to C are met. 2 Condition A is that each payment in the CCP chain is a payment of a manufactured overseas dividend representative of the same overseas dividend. 3 Condition B is that each payment in the CCP chain is made— a by or to a central counterparty, b to a clearing member acting in the capacity as clearing member for another person where a corresponding payment is made by the clearing member to a central counterparty, or c by a clearing member acting in the capacity as clearing member for another person where a corresponding payment is made to the clearing member by a central counterparty. 4 Condition C is that a notice has been issued by or on behalf of the central counterparty to the first CCP payer and the final CCP recipient— a confirming that conditions A and B are met, and b either— i stating names and registered addresses of the first CCP payer and the final CCP recipient, or ii containing sufficient information to enable the parties to the CCP chain to meet their tax obligations in the United Kingdom with respect to the manufactured overseas dividend. 5 For the purposes of Chapter 9 of Part 15 of the Income Tax Act 2007 and these Regulations— a the first CCP payer is treated as required to pay to the final CCP recipient a manufactured overseas dividend representative of an overseas dividend on overseas securities paid under an arrangement for the transfer of securities, b the payments in the CCP chain are disregarded, and c a manufactured overseas dividend representative of the same overseas dividend is treated as paid by the first CCP payer to the final CCP recipient. 6 In this regulation— “central counterparty” means a recognised clearing house ... , third country central counterparty or recognised investment exchange which carries on a business of providing a central counterparty clearing service in relation to arrangements for the transfer of overseas securities; “central counterparty clearing service” means the service provided to parties to an arrangement for the transfer of overseas securities, or to a clearing member acting on behalf of either of those parties, where there are contracts between each of those parties, or a clearing member, and the central counterparty in place of, or as an alternative to, a contract directly between those parties; “clearing member” means a party who provides clearing arrangements between a party to an arrangement for the transfer of overseas securities and a central counterparty; ... “final CCP recipient” means the party to whom the last payment in the CCP chain is made; “first CCP payer” means the maker of the first payment in the CCP chain; “recognised clearing house” has the meaning given by section 285(1)(b) of the Financial Services and Markets Act 2000; “recognised investment exchange” means— a recognised investment exchange within the meaning of the Financial Services and Markets Act 2000 (see section 285), a regulated market within the meaning of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments, or a multilateral trading facility within the meaning of that Directive; “third country central counterparty” has the meaning given by section 285(1)(d) of the Financial Services and Markets Act 2000. Retention and record of notices given under regulations 4 to 5B 6 1 A notice given under regulation 4 (6)(b) , 5(2)(b)(iii), 5A(5) or 5B(4) shall be in the form provided, or in a form authorised, by the Board. 2 A recipient of such a notice– a shall retain the notice for a period of six years and, whenever required to do so within that period, shall make it available for inspection by an officer of the Board, and b if he receives more than one such notice during any chargeable period, shall in addition maintain a record showing– i the date of each such notice received in that period, and ii a description and the amount of the manufactured overseas dividend referred to in each such notice received in that period. 3 A person who issues such a notice– a shall retain a copy of it for a period of six years and, whenever required to do so within that period, shall make that copy available for inspection by an officer of the Board, and b if he issues more than one such notice during any chargeable period, shall in addition maintain a record showing– i the date of each such notice issued in that period, and ii a description and the amount of the manufactured overseas dividend referred to in each such notice issued in that period. 4 Any record required to be maintained by the recipient of a notice under paragraph (2)(b), or by the issuer of a notice under paragraph (3)(b), shall be retained by that person for a period of six years from the end of the chargeable period to which the record relates. 4A In the case of a record retained under paragraph (2)(b) or (3)(b) which is in electronic form the person retaining it shall afford an officer of the Board such assistance and facilities as the officer may reasonably require in order to read the record. 5 Where the issuer of a notice fails to retain a copy of it for the period specified in paragraph (3)(a), or fails to maintain any such record as is specified in paragraph (3)(b) or to retain any such record for the period specified in paragraph (4), the Board may require that person to carry out, at his own expense, an audit of manufactured overseas dividends received by that person in order to ascertain the amount of tax, if any, liable to be deducted under paragraph 4(2) of Schedule 23A which was not deducted. 6 The scope and method of the audit referred to in paragraph (5) shall be agreed between the Board and the issuer of the notice or, in the absence of agreement, determined by the Board, and the issuer of the notice shall account for and pay any tax which on the basis of the findings of the audit was liable to be deducted but which was not deducted from manufactured overseas dividends received by him. Reduction of tax payable under paragraph 4(3) of Schedule 23A 6A 1 Where, in a case to which paragraph 4(3) of Schedule 23A applies, overseas tax was charged on, or in respect of, the making of the manufactured overseas dividend received by the United Kingdom recipient, the amount of tax to be accounted for and paid under that provision shall, for the purposes of the provisions of the Tax Acts relating to the charge to tax under Schedule D, be taken as reduced in accordance with paragraph (2) or, as the case may be, paragraph (3). 2 Where the amount specified in paragraph (4) exceeds the amount specified in paragraph (5), the amount of tax shall be reduced so as to equal the amount of the excess. 3 Where the amount specified in paragraph (4) is equal to or less than the amount specified in paragraph (5), the amount of tax shall be reduced to nil. 4 The amount specified in this paragraph is the amount of the manufactured overseas dividend received by the United Kingdom recipient. 5 The amount specified in this paragraph is the amount which the United Kingdom recipient would have received by way of the overseas dividend of which the manufactured overseas dividend is representative, had the overseas dividend been paid to him. 6 Relief claimed by the United Kingdom recipient under Part XVIII of the Taxes Act in a case to which paragraph (2) applies ... shall not exceed the aggregate of the amount of tax accounted for and paid by the United Kingdom recipient under paragraph 4(3) of Schedule 23A and the amount of overseas tax charged on, or in respect of, the making of the manufactured overseas dividend received by him. Disapplication of paragraph 4(3) of Schedule 23A 7 1 For the purposes of the provisions of the Tax Acts relating to the charge to tax under Schedule D, tax shall not be required to be accounted for and paid pursuant to paragraph 4(3) of Schedule 23A by a United Kingdom recipient of a manufactured overseas dividend which is received by him in any of the circumstances prescribed by paragraph (2). 2 The circumstances prescribed by this paragraph are where the United Kingdom recipient– a pays, in accordance with regulation 5, and without deduction of tax, a manufactured overseas dividend representative of the same overseas dividend as is represented by the manufactured overseas dividend received by him, or b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c is an approved United Kingdom collecting agent and the person beneficially entitled to the manufactured overseas dividend received by the approved United Kingdom collecting agent is not resident in the United Kingdom and receipt of the manufactured overseas dividend by the person beneficially entitled to it would be otherwise than in the course of a trade carried on through a branch or agency in the United Kingdom , or ca is an approved United Kingdom collecting agent and receipt of the manufactured overseas dividend by the person beneficially entitled to it would be a foreign permanent establishment receipt, or d is an approved United Kingdom collecting agent who is required to pay to an approved United Kingdom intermediary a manufactured overseas dividend representative of the same overseas dividend as is represented by the manufactured overseas dividend received by him, the approved United Kingdom intermediary is enabled or authorised as mentioned in sub– paragraph (a) above and issues a notice to the approved United Kingdom collecting agent authorising him to pay the manufactured overseas dividend without deduction of tax, or e is an approved United Kingdom collecting agent or an approved United Kingdom intermediary in receipt of a manufactured overseas dividend who shows that the overseas dividend manufacturer concerned was entitled to payment of the overseas dividend of which the manufactured overseas dividend is representative either— i as the holder of the overseas 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. 3 A notice given under paragraph (2)(d) shall be in the form provided, or in a form authorised, by the Board. 3A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 The United Kingdom recipient– a shall maintain a record of all manufactured overseas dividends received by him in any chargeable period in the circumstances prescribed by paragraph (2), showing– i a description and the amount of each such manufactured overseas dividend, and the date on which it was received, and ii the total amount of all such manufactured overseas dividends received in that period; b where he is an approved United Kingdom intermediary within sub–paragraph (b), or an approved United Kingdom collecting agent within sub–paragraph (c), of paragraph (2), shall in addition maintain a record of all manufactured overseas dividends paid by him as mentioned in sub–paragraph (b) or, as the case may be, sub–paragraph (c), of that paragraph in any chargeable period, showing– i the name and address of the person beneficially entitled to each such payment, ii a description and the amount of each such payment, and the date of the payment, and iii the total amount of all such payments made in that period; c shall retain any such record as is specified in sub–paragraph (a) or (b) of this paragraph for a period of six years from the end of the chargeable period to which the record relates, and shall make any such record available for inspection by an officer of the Board whenever required to do so during the period of retention; d where he is an approved United Kingdom collecting agent within sub–paragraph (d) of paragraph (2), shall in addition– i retain for a period of six years any notice received by him as mentioned in that sub–paragraph and, whenever required to do so, make it available for inspection by an officer of the Board, and ii if he receives more than one such notice during any chargeable period, maintain a record showing the date of each such notice received in that period and a description and the amount of the manufactured overseas dividend referred to in each such notice, and retain the record for a period of six years from the end of the chargeable period to which the record relates. 4A In the case of a record retained under paragraph (4) which is in electronic form the person retaining it shall afford an officer of the Board such assistance and facilities as the officer may reasonably require in order to read the record. 5 Where the United Kingdom recipient fails to maintain, or to retain for the requisite period, any such record as is referred to in paragraph (4), or fails to retain for the requisite period any such notice as is referred to in that paragraph, the Board may require that person to carry out, at his own expense, an audit of manufactured overseas dividends received by him in order to ascertain the amount of tax, if any, for which he was liable to account under paragraph 4(3) of Schedule 23A. 6 The scope and method of the audit referred to in paragraph (5) shall be agreed between the Board and the United Kingdom recipient or, in the absence of agreement, shall be determined by the Board, and the United Kingdom recipient shall account for and pay any tax which on the basis of the findings of the audit he was liable under paragraph 4(3) of Schedule 23A to account for and pay. Disapplication of paragraph 5 of Schedule 23A 7A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax treatment of manufactured overseas dividends to which regulations 4, 5 and 7 apply – further provision 8 For all purposes of the Tax Acts as they apply in relation to persons resident in the United Kingdom or to persons not so resident but carrying on a business through a permanent establishment in the United Kingdom, any manufactured overseas dividend to which regulation 4, 5 or 7 applies shall be treated in relation to the recipient, and all persons claiming title through or under him– a as if it were an overseas dividend of an amount equal to the amount of the manufactured overseas dividend, or b where paragraph (3) of regulation 4 applies and the amount of tax required under that paragraph in respect of the manufactured overseas dividend has been accounted for and paid, 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 the amount accounted for and paid; and the amount accounted for and paid shall accordingly be treated in relation to the recipient, and all persons claiming title through or under him, as an amount so withheld instead of an amount on account of income tax. Offsetting of tax by overseas dividend manufacturers 9 1 In the circumstances prescribed by paragraph (2) and subject to paragraph (4), a person who is an overseas dividend manufacturer in any chargeable period shall be entitled to set off the amounts specified in paragraph (1A) against the sums specified in paragraph (1B). This is subject to regulation 9ZA. 1A The amounts specified in this paragraph are— a amounts of overseas tax in respect of overseas dividends received by the overseas dividend manufacturer in the chargeable period otherwise than as foreign permanent establishment receipts ; b amounts of overseas tax charged on, or in respect of, the making of manufactured overseas dividends so received by him otherwise than as foreign permanent establishment receipts ; c amounts deducted under paragraph 4(2) of Schedule 23A from manufactured overseas dividends so received by him; d amounts accounted for and paid under paragraph 4(3) of Schedule 23A in respect of manufactured overseas dividends so received by him; e amounts accounted for and paid under regulation 4(3) in respect of manufactured overseas dividends so received by him. 1B The sums specified in this paragraph are sums due from the overseas dividend manufacturer on account of the amounts deducted by him under paragraph 4(2) of Schedule 23A from the manufactured overseas dividends paid by him in the chargeable period. 2 The circumstances prescribed by this paragraph are where– a the overseas dividend manufacturer is an approved United Kingdom intermediary, aa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b the overseas dividends and manufactured overseas dividends referred to in paragraph (1A) , if received by an overseas dividend manufacturer within sub– paragraph (a) of this paragraph who carries on a business in the ordinary course of which he receives overseas dividends and manufactured overseas dividends and pays manufactured overseas dividends, are such that a profit on the sale of the overseas securities to which those overseas dividends and manufactured overseas dividends relate would form part of the trading profits of that business, c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d except in a case to which paragraph (3) applies, the overseas dividends or, as the case may be, the manufactured overseas dividends received by him, do not fall to be matched, in accordance with regulation 10(1), against manufactured overseas dividends paid by him in that period. 3 This paragraph applies to a case where, under regulation 10(1), overseas dividends in respect of which overseas tax is payable received by the overseas dividend manufacturer in any chargeable period, and manufactured overseas dividends so received on or in respect of the making of which overseas tax has been charged or from which tax has been deducted or in respect of which tax falls to be accounted for and paid as mentioned in paragraph (1A) above, are matched against manufactured overseas dividends paid by him under deduction of tax in that period. 4 Where paragraph (3) applies in respect of any chargeable period, the overseas dividend manufacturer shall be entitled to set off against each other– a the tax referred to in that paragraph that is attributable to the matched overseas dividends and manufactured overseas dividends received, and b the tax referred to in that paragraph that is attributable to the matched manufactured overseas dividends paid. 4A Subject to paragraphs (4B) and (5), where overseas dividends or manufactured overseas dividends received by the overseas dividend manufacturer in any chargeable period fall to be matched, in accordance with regulation 10(1), against manufactured overseas dividends paid by him in that period, relief under Part XVIII of the Taxes Act may not be claimed by the overseas dividend manufacturer in respect of any tax referred to in paragraph (1A) that is attributable to those overseas dividends or manufactured overseas dividends received. 4B Where— a overseas dividends or manufactured overseas dividends received by the overseas dividend manufacturer in any chargeable period fall to be matched, in accordance with regulation 10(1), against manufactured overseas dividends to which regulation 3(6), 5 or 5A applies that are paid by him in that period, and b the gross amount of the overseas dividends or the manufactured overseas dividends is brought into account by the overseas dividend manufacturer as income for the purposes of income tax or corporation tax for that period, relief under section 112 of the Taxation (International and Other Provisions) Act 2010 (deduction from income for foreign tax (instead of credit against UK tax)) shall be given to the overseas dividend manufacturer in respect of any tax referred to in paragraph (1A) that is attributable to those overseas dividends or manufactured overseas dividends received. 4C Subject to paragraph (5), where tax referred to in paragraph (1A) that is attributable to overseas dividends or manufactured overseas dividends received by the overseas dividend manufacturer in any chargeable period is set off, in accordance with this regulation, against tax referred to in paragraph (1B) that is attributable to manufactured overseas dividends paid by him in that period, relief under Part XVIII of the Taxes Act may not be claimed by the overseas dividend manufacturer in respect of any tax referred to in paragraph (1A) that is attributable to those overseas dividends or manufactured overseas dividends received. 5 Except in a case to which paragraph (3) applies, where in accordance with this regulation tax is set off by an overseas dividend manufacturer in any chargeable period and in relation to that period the sum of the overseas tax and amounts referred to in paragraph (1A) exceeds the total amount of the sums due as mentioned in paragraph (1B) , relief under Part XVIII of the Taxes Act may be claimed by the overseas dividend manufacturer in respect of the amount of the excess. 6 Where in accordance with this regulation tax is set off by an overseas dividend manufacturer in any chargeable period and in relation to that period the total amount of the sums due from the overseas dividend manufacturer as mentioned in paragraph (1B) exceeds the sum of the overseas tax and amounts referred to in paragraph (1A) , the amount of the excess shall be payable to the Board. 7 References to overseas tax in this regulation are references to the amount of such tax which is eligible for relief under Part XVIII of the Taxes Act either– a pursuant to arrangements made with the government of the overseas territory specified in paragraph (8) which have effect by virtue of section 788 of the Taxes Act and relate to the overseas dividend or manufactured overseas dividend concerned, or b by virtue of other provisions of Part XVIII of the Taxes Act other than section 790(5)(c)(ii) of that Act. 8 The overseas territory specified in this paragraph— i so far as overseas dividends are concerned, is the territory of the government or public or local authority which issued the securities in question or, where the securities were issued by any other body of persons not resident in the United Kingdom, the territory under whose law that tax would have been payable; ii so far as manufactured overseas dividends are concerned, is the territory of the government by which tax is charged on, or in respect of, the making of the manufactured overseas dividend concerned. Entitlement to offsetting 9ZA 1 There shall be no entitlement to set off under regulation 9(1) in relation to overseas dividends or manufactured overseas dividends received by an overseas dividend manufacturer in any chargeable period if— a the overseas dividends or the manufactured overseas dividends do not fall to be matched, in accordance with regulation 10(1), against manufactured overseas dividends paid by the overseas dividend manufacturer in that period, and b the gross amount of the overseas dividends or manufactured overseas dividends is not brought into account in accordance with generally accepted accounting practice by the overseas dividend manufacturer as income for the purposes of income tax or corporation tax for that period. This is subject to paragraph (2). 2 Paragraph (1) does not apply if the overseas dividend manufacturer elects to bring into account the gross amount of the overseas dividends or manufactured overseas dividends received in any chargeable period as income for the purpose of calculating his liability to income tax or corporation tax for that period. 3 An election under paragraph (2)— a must be made in writing to Her Majesty’s Revenue and Customs, b applies in relation to overseas dividends and manufactured overseas dividends received in the chargeable period in which the election is made and in subsequent periods, and c may be revoked by notice in writing to Her Majesty’s Revenue and Customs with effect from the chargeable period in which the notice is given. Offsetting of tax by overseas dividend manufacturers who are not United Kingdom intermediaries 9A 1 An overseas dividend manufacturer who is not an approved United Kingdom intermediary shall be entitled to set off in any chargeable period amounts of overseas tax in respect of overseas dividends received by him in that chargeable period otherwise than as a foreign permanent establishment receipt against sums due from him on account of the amounts deducted by him under paragraph 4(2) of Schedule 23A from manufactured overseas dividends paid by him in that chargeable period that are representative of those overseas dividends. 2 Where overseas tax referred to in paragraph (1) is set off against sums referred to in that paragraph, relief under Part XVIII of the Taxes Act may not be claimed by the overseas dividend manufacturer in respect of that overseas tax. 2A This paragraph applies where an overseas dividend manufacturer who is not an approved United Kingdom intermediary receives in any chargeable period overseas dividends or manufactured overseas dividends and pays in that period manufactured overseas dividends to which regulation 3(6), 5 or 5A applies that are representative of those overseas dividends or manufactured overseas dividends received. 2B Where paragraph (2A) applies— a relief under section 811 of the Taxes Act shall be given to the overseas dividend manufacturer in respect of any tax referred to in regulation 9(1A) that is attributable to the overseas dividends or manufactured overseas dividends received by him; and b no other relief under Part 18 of the Taxes Act may be claimed by him in respect of any such tax. 2C But paragraph (2B) only applies to a case where the gross amount of the overseas dividends or, as the case may be, the manufactured overseas dividends received by the overseas dividend manufacturer in any chargeable period is brought into account as income for the purposes of income tax or corporation tax for that period. 3 References in this regulation to overseas tax shall be construed in accordance with regulation 9(7). Matching of dividends and manufactured overseas dividends 10 1 For the purpose of paragraphs (2)(d) and (3) of regulation 9, overseas dividends paid on overseas securities of a particular kind in respect of a particular dividend date which are received in any chargeable period by an overseas dividend manufacturer, and manufactured overseas dividends representative of those overseas dividends which are received by him in that period– a shall be matched against manufactured overseas dividends representative of those overseas dividends which are paid by him in that period in accordance with the following order of priority– i manufactured overseas dividends received without deduction of tax other than manufactured overseas dividends in respect of which tax falls to be accounted for and paid under paragraph 4(3) of Schedule 23A or regulation 4(3) ; ii overseas dividends received; and iii manufactured overseas dividends received to which tax referred to in regulation 9(1A) is attributable ; and b shall first be matched against manufactured overseas dividends paid without deduction of tax under paragraph 4(2) of Schedule 23A by virtue of regulation 3(6), 5 or 5A , and the balance, if any, shall be matched against manufactured overseas dividends paid by him from which tax has been deducted under paragraph 4(2) of Schedule 23A. 1A But the following cannot be matched under paragraph (1)— a overseas dividends received as foreign permanent establishment receipts, b manufactured overseas dividends received as foreign permanent establishment receipts, and c manufactured overseas dividends paid as foreign permanent establishment payments. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounting for tax payable under paragraph 4(2) and (3) of Schedule 23A and these Regulations 11 1 Within 30 days of the end of a chargeable period– a an overseas dividend manufacturer shall pay to the Board all amounts which he was liable to deduct under paragraph 4(2) of Schedule 23A on account of income tax from manufactured overseas dividends paid by him in that period; b an overseas dividend manufacturer who is an approved United Kingdom intermediary shall pay to the Board the amount of any excess payable under regulation 9(6) attributable to that period; c a United Kingdom recipient shall pay to the Board all amounts of tax for which he was liable to account under paragraph 4(3) of Schedule 23A in respect of manufactured overseas dividends received by him in that period; d an approved United Kingdom intermediary or an approved United Kingdom collecting agent shall pay to the Board all amounts of tax for which he was liable to account under regulation 4(3) in respect of ... manufactured overseas dividends received by him in that period. 2 Within 30 days of the end of a chargeable period– a an overseas dividend manufacturer shall make a return to the Board or an inspector, in such form as the Board may prescribe, showing– i the amounts which he was liable to deduct under paragraph 4(2) of Schedule 23A on account of income tax from ... manufactured overseas dividends paid by him in that period, and ii . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii the amount of any excess payable under regulation 9(6) attributable to that period; b a United Kingdom recipient shall make a return to the Board or an inspector, in such form as the Board may prescribe, showing the amounts of tax for which he was liable to account under paragraph 4(3) of Schedule 23A in respect of manufactured overseas dividends received by him in that period; c an approved United Kingdom intermediary or an approved United Kingdom collecting agent shall make a return to the Board or an inspector, in such form as the Board may prescribe, showing the amounts of tax for which he was liable to account under regulation 4(3) in respect of ... manufactured overseas dividends received by him in that period. 3 Any amount referred to in paragraph (1) shall be due at the end of the period of 30 days specified in that paragraph and shall be payable without the making of any assessment but may be assessed on the overseas dividend manufacturer or, as the case may be, the United Kingdom recipient, approved United Kingdom intermediary or approved United Kingdom collecting agent (whether or not it has been paid when the assessment is made) if it is not paid in full on or before that date. 4 In any case where– a it appears to the inspector that there is– i a manufactured overseas dividend paid, or an overseas dividend or a manufactured overseas dividend received, by an overseas dividend manufacturer in a chargeable period, or ii an overseas dividend or a manufactured overseas dividend received by a United Kingdom recipient, an approved United Kingdom intermediary or an approved United Kingdom collecting agent in a chargeable period, which ought to have been but which has not been included in a return under paragraph (2) relating to that period, or b the inspector is dissatisfied with any return under paragraph (2), the inspector may make an assessment to the best of his judgment on the overseas dividend manufacturer or, as the case may be, the United Kingdom recipient, approved United Kingdom intermediary or approved United Kingdom collecting agent. 5 Any income tax due under an assessment made by virtue of paragraph (4) shall be treated for the purposes of interest on unpaid tax as having been payable at the end of the period of 30 days specified in paragraph (1). 6 Any amount for which an approved United Kingdom intermediary is liable to account under regulation 6(6), and any amount for which a United Kingdom recipient is liable to account under regulation 7(6), in respect of manufactured overseas dividends received by them in a chargeable period, shall be due at the end of the period of 30 days from the end of that period, and shall be payable without the making of any assessment but may be assessed on the approved United Kingdom intermediary or, as the case may be, the United Kingdom recipient (whether or not it has been paid when the assessment is made) if it is not paid in full on or before that date. 7 The like provisions as are contained in the Income Tax Acts with respect to the time within which an assessment may be made, so far as they refer or relate to the year of assessment for which an assessment is made, or the year to which an assessment relates, shall have effect in relation to an assessment under this regulation notwithstanding that, under this regulation, the assessment may be said to relate to a period which is not a year of assessment; and the like provisions as are contained in section 36 of the Management Act as to the circumstances in which an assessment may be made out of time shall have effect accordingly on the footing that any such assessment relates to the year of assessment in which the period in question ends. 8 Income tax assessed on a person under this regulation shall be due at the end of the period of 30 days after the issue of the notice of assessment (unless due earlier under paragraph (3) or (6)). 9 Any tax assessable under any one or more of the provisions of this regulation may be included in one assessment if the tax so included is all due on the same date. 10 Section 31 and Part V of the Management Act shall apply to an appeal against any assessment to tax under this regulation. 11 Subsections (1), (7) and (8) of section 87 of the Management Act shall apply to tax assessable under this regulation as they apply to tax assessable in accordance with Schedules 13 and 16 to the Taxes Act, and accordingly those subsections shall have effect as if references to those schedules included references to this regulation. 12 Section 98 of the Management Act shall apply in relation to a return under paragraph (2) with the modification specified in paragraph (13). 13 At the end of the second column of the Table in section 98 of the Management Act there shall be inserted– “Regulation 11(2) of the Income Tax (Manufactured Overseas Dividends) Regulations 1993”. Tax treatment of manufactured overseas dividends representative of foreign dividends 12 1 This regulation applies to a case where a manufactured overseas dividend is paid to a collecting agent in circumstances where, had it been the overseas dividend of which it is representative, it would have been— a a foreign dividend (as defined in section 18(3D) of the Taxes Act, or b interest on a quoted Eurobond (as defined by section 124 of that Act) held in a recognised clearing system. 2 Where this regulation applies– a ... deduction of an amount determined by reference to the gross amount of the manufactured overseas dividend shall be made by the ... collecting agent from the manufactured overseas dividend on account of income tax similar to the deduction that would, in the case of the overseas dividend of which the manufactured overseas dividend is representative, have been made under Chapter VIIA of Part IV of the Taxes Act ; and b the provisions of that Chapter relating to collecting agents shall apply in relation to amounts falling to be deducted under sub-paragraph (a) as if references in that Chapter to relevant dividends, or the proceeds of sale or other realisation of coupons for relevant dividends, included references to manufactured overseas dividends to which this regulation applies or, as the case may be, the proceeds of sale or other realisation of manufactured overseas dividends to which this regulation applies. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Further provision relating to manufactured overseas dividends representative of foreign dividends 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Records to be kept in respect of certain manufactured overseas dividends paid without deduction of tax 14 1 An overseas dividend manufacturer or an approved United Kingdom collecting agent shall maintain a record in respect of any manufactured overseas dividend paid by him to which this regulation applies showing– a the date of payment and the amount of the manufactured overseas dividend, b the name of the person to whom payment was made, ba his grounds for believing that the payment should be made without deduction of tax, and c particulars of the overseas securities and the overseas dividend on those securities to which the manufactured overseas dividend relates. 2 This regulation applies to any manufactured overseas dividend which an overseas dividend manufacturer or an approved United Kingdom collecting agent, by virtue of regulation 5(1B), pays without deduction of tax. 3 An overseas dividend manufacturer or an approved United Kingdom collecting agent— a shall retain for a period of six years— i any record required to be maintained by him under paragraph (1), and ii any evidence relevant to his grounds for believing that the payment should be made without deduction of tax; and b whenever required to do so within that period, shall make any such record or evidence available for inspection by an officer of the Board. 3A In the case of evidence or a record retained under paragraph (3) which is in electronic form the person retaining it shall afford an officer of the Board such assistance and facilities as the officer may reasonably require in order to read the record or certificate. 4 Where an overseas dividend manufacturer or an approved United Kingdom collecting agent fails to maintain, or to retain for the requisite period, any such record, or fails to retain any such evidence for the requisite period, the Board may require that person to carry out, at his own expense, an audit of manufactured overseas dividends paid by him in order to ascertain the amount of tax, if any, liable to be deducted under paragraph 4(2) of Schedule 23A which was not deducted. 5 The scope and method of the audit referred to in paragraph (4) shall be agreed between the Board and the person concerned or, in the absence of agreement, shall be determined by the Board. Issue of vouchers in respect of manufactured overseas dividends paid under deduction of tax 15 1 Subject to paragraph (3) , where an overseas dividend manufacturer makes a payment of a manufactured overseas dividend from which an amount is deducted by him under paragraph 4(2) of Schedule 23A ..., he shall furnish the recipient of the payment with a voucher showing the details specified in paragraph (4). 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Where the overseas dividend manufacturer is an approved United Kingdom intermediary, he shall not be required to furnish the recipient of a payment with the voucher referred to in paragraph (1) unless the recipient requests such a voucher. 4 The details specified in this paragraph are that the voucher shall show– a the gross amount of the payment, b the amount deducted or, where more than one amount has been deducted, each such amount separately, and c the actual amount paid. 5 An approved United Kingdom collecting agent, where requested to do so by the person beneficially entitled to a manufactured overseas dividend in respect of which tax has been paid or is due to be paid by the approved United Kingdom collecting agent under paragraph 4(3) of Schedule 23A or regulation 4(3), shall furnish that person with a voucher showing– a the gross amount of the manufactured overseas dividend received by him, b the amount of tax paid or due to be paid by him in respect of the manufactured overseas dividend, and c the actual amount paid. Modifications of section 21 of the Management Act in relation to overseas dividend manufacturers 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tim Kirkhope Tim Wood Two of the Lords Commissioners of Her Majesty’s Treasury 9th August 1993