The legislation dealing with manufactured payments is found at
ICTA88/SCH23A, which is re- written for income tax purposes, for
2007-08 and later tax years in Chapter 2, Part 11 and Chapter 9,
Part 15 ITA07. This provides that a manufactured payment is one
that arises under a contract or other arrangement for the transfer
of securities requiring one of the parties (the “dividend
manufacturer”) to pay to the other (“the
recipient”) an amount representative of a dividend on the
securities.
Where the recipient of a dividend simply passes on the
dividend to which it is not entitled, this does not amount to
dividend manufacture. For example, if a person has made a cum
dividend sale out of his existing share holding (a `long' position)
and receives the dividend merely because the company register has
not been updated to reflect the change; the passing on of this
dividend to the purchaser is not dividend manufacture. See CIR v
Roberts 13TC277 and CIR v Oakley 9TC582.
