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(a) in the definitions of "approved United Kingdom collecting agent" and "approved United Kingdom intermediary" for "branch or agency" substitute "permanent establishment";

(b) omit the definition of "the Double Taxation Relief Regulations"[4];

(c) for the definition of "United Kingdom recipient" substitute - 

" "United Kingdom recipient" shall be construed in accordance with paragraph 4(3A) of Schedule 23A[5].".

    (3) After paragraph (2) add - 

    " (3) In these Regulations references to a permanent establishment shall be read, in relation to accounting periods beginning before 1st January 2003, as references to a branch or agency.".

Amendments to regulation 3
     4.  - (1) Amend regulation 3 (prescribed rates of relevant withholding tax) as follows.

    (2) In paragraph (1)(a)(i) for "branch or agency" substitute "permanent establishment".

    (3) Omit paragraph (4).

Amendments to regulation 4
     5.  - (1) Amend regulation 4 (tax treatment of approved manufactured overseas dividends paid to approved United Kingdom intermediaries or approved United Kingdom collecting agents)[6] as follows.

    (2) In paragraph (2)(a)(i) for "branch or agency" substitute "permanent establishment".

    (3) For paragraph (4) substitute - 

    " (4) Paragraph (3) shall not apply where either paragraph (5) or (6) applies.

    (5) This paragraph applies where the approved United Kingdom intermediary or approved United Kingdom collecting agent pays, in accordance with regulation 5, and without deduction of tax, a manufactured overseas dividend representative of the same overseas dividend as is represented by the manufactured overseas dividend received by him.

    (6) This paragraph applies where the approved United Kingdom collecting agent is required to pay to an approved United Kingdom intermediary a manufactured overseas dividend representative of the same overseas dividend as is represented by the manufactured overseas dividend received by him and the approved United Kingdom intermediary - 


(a) pays as mentioned in paragraph (5) the manufactured overseas dividend, and

(b) issues a notice to the approved United Kingdom collecting agent authorising him to make the payment without deduction of tax.".

Amendments to regulation 5
     6.  - (1) Amend regulation 5 (tax treatment of approved manufactured dividends paid to persons resident outside the United Kingdom)[7] as follows.

    (2) In paragraph (1) - 

(a) at the beginning insert "Subject to paragraph (1A),";

(b) for "the circumstances prescribed by paragraph (2)" substitute "either of the circumstances prescribed by paragraphs (1B) and (2)".

    (3) After paragraph (1) insert - 

    " (1A) Where a manufactured overseas dividend is paid in the circumstances prescribed by paragraph (1B) by a person who is not an approved United Kingdom intermediary, the dividend shall be treated, for the purposes of the provisions of the Tax Acts relating to the charge to tax under Schedule D and so far as the payer is concerned, as if the amount paid was an annual payment, within section 349(1) of the Taxes Act, but so that no amount is required to be deducted on account of income tax from the amount of the payment, or accounted for under section 350 of that Act.

    (1B) The circumstances prescribed by this paragraph are where - 


(a) a manufactured overseas dividend is paid by a person who is resident in the United Kingdom, or, if not so resident, makes the payment in the course of a trade which he carries on through a permanent establishment in the United Kingdom;

(b) the payment is to or for the benefit of a person beneficially entitled to it who is not a United Kingdom recipient; and

(c) regulation 4(1) does not apply.".

    (4) In paragraph (2) - 

(a) for the words from "where a manufactured overseas dividend" to the word "or" immediately preceding sub-paragraph (b) substitute - 

" where - 
(a) a manufactured overseas dividend is paid by an approved United Kingdom intermediary who, if not resident in the United Kingdom, makes the payment in the course of a trade which he carries on through a permanent establishment in the United Kingdom; and;"



(b) in sub-paragraph (b)(ii) for the words from "branch or agency" to "applies" substitute "permanent establishment in the United Kingdom and makes the payment to or for the benefit of a person beneficially entitled to it who is not a United Kingdom recipient".

Amendment to regulation 6
     7. In regulation 6(1) (retention and record of notices given under regulations 4 and 5) for "(4)(c)" substitute "(6)(b)".

Amendments to regulation 7(2)
     8. In regulation 7(2) (disapplication of paragraph 4(3) of Schedule 23A) - 

(a) for sub-paragraph (a) substitute - 


" (a) pays, in accordance with regulation 5, and without deduction of tax, a manufactured overseas dividend representative of the same overseas dividend as is represented by the manufactured overseas dividend received by him, or;"



(b) omit sub-paragraph (b).

Amendment to regulation 8
     9. In regulation 8 (tax treatment of manufactured overseas dividends to which regulations 4, 5 and 7 apply - further provision) for "branch or agency" substitute "permanent establishment".

Amendments to regulation 9A
     10.  - (1) Amend regulation 9A (offsetting of tax by overseas dividend manufacturers who are not United Kingdom intermediaries)[8] as follows.

    (2) After paragraph (2) insert - 

    " (2A) This paragraph applies where an overseas dividend manufacturer who is not an approved United Kingdom intermediary receives in any chargeable period overseas dividends or manufactured overseas dividends and pays in that period manufactured overseas dividends to which regulation 5 applies that are representative of those overseas dividends or manufactured overseas dividends received.

    (2B) Where paragraph (2A) applies - 


(a) relief under section 811 of the Taxes Act shall be given to the overseas dividend manufacturer in respect of any tax referred to in regulation 9(1A) that is attributable to the overseas dividends or manufactured overseas dividends received by him; and

(b) no other relief under Part 18 of the Taxes Act may be claimed by him in respect of any such tax.".

Amendments to regulation 10
     11.  - (1) Amend regulation 10 (matching of dividends and manufactured overseas dividends)[9] as follows.

    (2) In paragraph (1)(b) for the words from "by reason of - " to "nil percent." substitute "by virtue of regulation 5".

    (3) In paragraph (2) - 

(a) after "paid" insert "to a United Kingdom recipient";

(b) for "recipient of the manufactured overseas dividend paid" substitute "United Kingdom recipient".

    (4) In paragraph (3) - 

(a) after "paid" in the first place where it occurs insert "to a United Kingdom recipient";

(b) in sub-paragraph (a) and in sub-paragraph (b) (three times) for "paid" substitute "so paid";

(c) in sub-paragraph (c) for "recipient" substitute "United Kingdom recipient".

    (5) In paragraph (4) - 

(a) after "paid" in the first place where it occurs insert "to a United Kingdom recipient";

(b) in sub-paragraphs (a) and (b) for "paid" substitute "so paid";

(c) in sub-paragraph (c) for "recipient" substitute "United Kingdom recipient".

Amendments to regulation 14
     12.  - (1) Amend regulation 14 (records to be kept in respect of certain manufactured overseas dividends paid without deduction of tax) as follows.

    (2) For paragraph (1)(b) substitute - 

" (b) the name of the person to whom payment was made,

(ba) his grounds for believing that the payment should be made without deduction of tax, and."

    (3) For paragraphs (2) and (3) substitute - 

    " (2) This regulation applies to any manufactured overseas dividend which an overseas dividend manufacturer or an approved United Kingdom collecting agent, by virtue of regulation 5(1B), pays without deduction of tax.

    (3) An overseas dividend manufacturer or an approved United Kingdom collecting agent - 


(a) shall retain for a period of six years - 


(i) any record required to be maintained by him under paragraph (1), and

(ii) any evidence relevant to his grounds for believing that the payment should be made without deduction of tax; and



(b) whenever required to do so within that period, shall make any such record or evidence available for inspection by an officer of the Board.".

    (4) In paragraph (4) for "certificate" substitute "evidence".


Jim Murphy

Derek Twigg
Two of the Lords Commissioners of Her Majesty's Treasury

9 October 2003

[2] S.I. 1993/2004, relevantly amended by S.I. 1996/1229, S.I. 1996/2643 and S.I. 1997/988.back

[3] Regulation 2 was relevantly amended by regulation 3(b) and (c) of S.I. 1996/1229 and regulation 3(1) of S.I. 1996/2643.back

[4] The reference is to the Double Taxation Relief (Taxes on Income) (General) (Manufactured Overseas Dividends) Regulations 1993 (S.I. 1993/1957) which were amended by S.I. 1995/1551 and S.I. 1996/2654. All these regulations are revoked by S.I. 2003/2581 with effect from 1st November 2003.back

[5] Paragraph 4(3A), together with paragraph 4(3B), was inserted by section 159(5) of the Finance Act 1996.back

[6] Regulation 4 was amended by regulation 4 of S.I. 1996/1229, regulation 5 of S.I. 1996/2643 and regulation 4 of S.I. 1997/988.back

[7] Regulation 5 was amended by regulation 4 of S.I. 1996/1229 and regulation 6 of S.I. 1996/2643.back

[8] Regulation 9A was inserted by regulation 7 of S.I. 1997/988.back

[9] Regulation 10 was relevantly amended by regulation 11(b) of S.I. 1996/2643.back

  Prepared 16 October 2003