Regulation 7 disapplies the ITA07/S923 reverse charge in a
number of circumstances. In particular, ITA07/S923 will not apply
where the recipient then pays on a corresponding MOD gross under
regulation 5
CFM17385. The rule includes chains of
payments involving AUKI/AUKCAs where the final payment goes abroad.
The rule is intended to prevent any reverse charge where the
arrangements are essentially conduit ones where the MOD flows
through the UK.
Regulation 6A provides that the ITA07/S923 reverse charge can
be reduced if the MOD itself suffers overseas tax on payment. The
reverse charge is limited to the amount required to reduce the net
amount of the MOD to the amount the recipient would have received
had it received the real dividend. It then limits the amount of tax
that can be claimed as tax credit relief to the sum of the reverse
charge and the actual overseas tax on the MOD. The aim is to ensure
that a UK recipient of a MOD received under deduction of tax is not
in a worse position than if it had received the real overseas
dividend.
