Manufactured overseas dividends representative of interest received as an integral part of a trade will be taken into account in computing the profits of that trade on normal principles. In other cases they will be brought into account as non-trading loan relationship credits. Double taxation relief for any tax suffered on the manufactured overseas dividend is available subject to the normal rules (and the MOD regulations where they apply). Where securities are out on repo or stock loan then section 807A ICTA 1988 may be in point. See INTM167210. In these circumstances, the claimant will need to be able to demonstrate that overseas tax was suffered on the real overseas dividend.
A manufactured overseas dividend in respect of overseas debt
securities received by a person chargeable to income tax will be
taxable under section 5 ITTOIA 2005 if received in the ordinary
course of a trade. Double tax relief will be available subject to
the normal rules (and MOD regulations).
Where the receipt is not in the normal course of a trade the
recipient is treated under Regulation 2B(4) as receiving a receipt
of an amount equal to the cash payment actually received and which
is taxable under S369 ITTOIA 2005, but will is not entitled to
claim any double taxation relief in respect of any tax attributable
to the receipt.
