Commentary on Sections Overview Overview Section 578: Manufactured interest on UK securities
1723.This section deals with the income tax treatment of persons receiving or paying manufactured interest on UK securities. It is based on paragraph 3(1), (2) and (3) of Schedule 23A to ICTA.
1724.Subsection (1) defines “manufactured interest” and states when the section applies.
1725.For income tax purposes, subsection (2) treats the manufactured interest in the hands of the recipient (or, if different, the owner of the manufactured interest) as if it was a real payment of interest on the UK securities.
1726.Subsections (1) and (2) together ensure that if an income tax payer claims title to the manufactured interest through or under a recipient (such as a nominee), the manufactured interest is still treated for income tax purposes as if it was a real payment of interest even if the recipient is not an income tax payer.
1727.Subsection (3) deals with the position of the payer. It is subject to sections 579 and 580 (allowable deductions).