Explanatory note

These Regulations amend the Income Tax (Manufactured Overseas Dividends) Regulations 1993 (S.I. 1993/2004) (“the principal Regulations”).

Regulation 1 provides for citation, commencement and effect.

Regulation 2 introduces the amendments to the principal Regulations.

Regulation 3 amends regulation 5 (tax treatment of approved manufactured overseas dividends paid to persons resident outside the United Kingdom) so that the recipient of the last payment in a chain of payments of manufactured overseas dividends is not required to issue a notice authorising the payment to be made without deduction of tax.

Regulation 4 makes two amendments to regulation 5A (chains of payments where last payment made to, or for the benefit of, registered pension scheme or is linked solely to pension business). The first amendment removes the requirement that the recipient of the last payment in a chain of payments of manufactured overseas dividends issue a notice to the original payer to make the payment at the applicable rate of withholding tax. The second amendment ensures that the determination of the applicable rate of relevant withholding tax under regulation 5A for each payment in the chain does not apply in relation to the last payment in the chain.

Regulation 5 inserts regulation 5B (chains of payments involving central counterparties). This provides that where certain conditions are met, payments in a chain of payments involving a central counterparty are ignored and the maker of the first payment in the chain is treated as making a payment of a manufactured overseas dividend to the party receiving the last payment in the chain.

Regulation 6 amends regulation 6 (retention and record of notices given under regulations 4 and 5) to insert references to regulations 5A(5) and 5B so that notices under those provisions are subject to the requirements as to form, retention and record keeping imposed by regulation 6.

Regulation 7 amends regulation 10 (matching of dividends and manufactured overseas dividends) to omit paragraphs (2) to (4) to remove the requirement to forward vouchers relating to the deduction of overseas tax from an overseas dividend to the United Kingdom recipient.

Regulation 8 amends regulation 15 (issue of vouchers in respect of manufactured overseas dividends paid under deduction of tax) to omit references to regulation 10(2) to (4).

A Tax Information and Impact Note covering this instrument will be published on the HMRC website at http://www.hmrc.gov.uk/thelibrary/tiins.htm.