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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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Other tax rules on corporate finance: manufactured payments: manufactured dividends on UK shares

This guidance applies to manufactured payments made before 1 January 2014, when the tax rules were simplified. For manufactured payments made on or after 1 January 2014, see CFM74430.

UK shares and manufactured dividends

The recipient of a manufactured dividend is treated for all purposes of the Tax Acts as if it had received a dividend on the UK shares concerned.

A UK company is treated as making a payment of one of its own dividends. This means that the payer cannot obtain a deduction for the payments unless the conditions in CTA09/S130 (ITTOIA05/S366(1)) relating to financial traders are satisfied. Non-resident companies trading in the UK through a permanent establishment get similar treatment and are therefore denied a deduction for the manufactured payment unless CTA09/S130 or ITTOIA05/S366 applies.

The treatment of manufactured dividends paid and received by companies in the course of repos is covered in CFM46260 and CFM46380.

Where a non-corporate pays a manufactured payment in respect of UK shares the payment will, so far as not otherwise deductible (for instance where the person is a financial trader), qualify for relief against net income but not if made directly or indirectly in consequence of, or in connection with avoidance arrangements (ITA07/S574).