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HMRC internal manual

International Manual

Distribution exemption: Interpretation: manufactured dividends

Tax treatment of manufactured dividends aligns with real equivalents

FA 2009 amended the manufactured dividends legislation to align the tax treatment of manufactured dividends (whether payable in respect of UK or overseas equities) with their real equivalents. Similarly, the amendments ensure that the payment of a manufactured dividend is deductible if and to the extent that the equivalent receipt is taxable.

In some cases exemption for the real dividend depends on the nature of the shares in respect of which it is payable. CTA10/Part 17 ensures that where a manufactured dividend is paid in respect of UK shares the payment is treated as made in respect of the shares in question. CTA10/S795 ensures that CTA09/Part 9A will also apply to a manufactured overseas dividend as if it were paid in respect of the shares in question.

CTA10/S787 ensures that where exemption under CTA09/Part 9A depends upon identity of the payer of the dividend, then the payer of a manufactured UK dividend shall be treated as the payer of the real dividend of which the manufactured payment is representative.

CTA10/S795 has the same purpose in relation to manufactured overseas dividends.