Introduction Background
96.The legislation applying to manufactured payments is complex, and has been the subject of a number of avoidance schemes.
97.A consultation was carried out in 2012 which set out proposals for reforming and simplifying the legislation. Responses to the consultation document were supportive.
98.Legislation is therefore now being introduced to simplify the tax treatment of manufactured payments.
99.For corporation tax purposes, the current treatment of manufactured interest is not changed.
100.Manufactured dividends will be treated in two possible ways. When they are received by a financial trader, they will be taxed as trade receipts, and when paid by a financial trader they will generally be allowed as a trade deduction.
101.Generally, no specific provisions will be required to bring about this effect, and following the accounts prepared in accordance with GAAP will bring about this effect.
102.In other circumstances, the receipt of a manufactured dividend will not be taxable and the payment of a manufactured dividend will not be allowable as a deduction.
103.The current rules requiring tax to be deducted when a manufactured overseas dividend (MOD) is paid will be repealed. The reverse charge (under which a UK company receiving a MOD from which tax had not been deducted had to deduct tax and pay it to HMRC) has also been repealed.