Commentary on Sections Overview Chapter 2: Accrued income profits and losses Section 647: Makers of manufactured payments
1903.This section excludes makers of “manufactured payments” from the accrued income scheme. It is based on section 715(6) of ICTA.
1904.Broadly, a person may “manufacture” interest by buying a security without accrued interest and then selling it with accrued interest just before the next interest payment date. The maker of the manufactured payment can deliver only an “ex-dividend” security and so “manufactures” (makes) a payment to the buyer as compensation for the buyer not receiving the interest to which the buyer is entitled. The manufactured payment is taxed as though it is actual income. Chapter 2 of Part 11 applies to manufactured payments.
1905.This section ensures that the tax charge under that Part takes priority over any possible tax charge under the accrued income scheme. It does so by treating the person who manufactures interest:
	as an excluded transferee in relation to the transfer under which the securities were acquired; and
	as an excluded transferor in relation to the onward sale.
1906.This treatment applies only if the value of the securities sold on at least equals the value of the securities acquired (but see section 663 for the reduction made where that value is insufficient).