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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: payments made on or after 1 January 2014: manufactured overseas dividends: deduction of tax

This guidance applies to manufactured payments made on or after 1 January 2014. For manufactured payments made before 1 January 2014, see CFM74300.

The deduction of tax regime for manufactured overseas dividends (MODs)

Deduction of tax from manufactured overseas dividends (MODs) was abolished with effect from 1 January 2014.

When a manufactured overseas dividend is paid on or after 1 January 2014, no tax should be deducted.

This applies whenever the underlying dividend was paid, so that if for example an overseas dividend was paid on 31 December 2013, and the related manufactured overseas dividend was paid on 2 January 2014, then no tax is to be deducted from the manufactured payment.

The reverse charge on manufactured overseas dividends received (CFM74380) was abolished from the same date.

Double taxation relief from 1 January 2014

Since UK tax is no longer deducted from manufactured overseas dividends, it follows that, in most circumstances, there is no tax set-off available to the recipient of a manufactured dividend.

There is one exception to this, which applies when a manufactured dividend is received from which overseas tax has actually been deducted. In those circumstances, double taxation relief may be due provided that the tax withheld would otherwise meet all of the requirements of the DTR legislation and treaties.

Although a manufactured dividend received is treated as if it were a real dividend, this does not give the recipient any entitlement to the double taxation relief which it might have had if it had received the real dividend (ITAs814D(5) CTA 2010 and s614ZD(5) ITA 2007).