Citation, commencement and effect

1. —(1) These Regulations may be cited as the Income Tax (Manufactured Overseas Dividends) (Amendment) Regulations 2010 and shall come into force on 14th April 2010.

(2) These Regulations shall have effect in relation to manufactured overseas dividends made or treated as made on or after that day.

Amendments to the Income Tax (Manufactured Overseas Dividends) Regulations 1993

2.The Income Tax (Manufactured Overseas Dividends) Regulations 1993( 2 ) are amended as follows.

Amendment of regulation 2 (interpretation)

3. In regulation 2 (interpretation), in paragraph (1) after the definition of “gross amount of the manufactured overseas dividend” insert—

“ “gross amount of the overseas dividend” has the meaning given by—

Amendment of regulation 6A (reduction of tax payable under paragraph 4(3) of Schedule 23A)

4. In regulation 6A (reduction of tax payable under paragraph 4(3) of Schedule 23A)( 4 ) in paragraph (6) omit “, other than relief given by virtue of section 811 of that Act,”.

Amendment of regulation 9 (offsetting of tax by overseas dividend manufacturers)

5. —(1) Amend regulation 9 (offsetting of tax by overseas dividend manufacturers) as follows.

(2) In paragraph (1), at the end insert—

“ This is subject to regulation 9ZA. ” .

(3) For paragraph (4B)( 5 ) substitute—

“ (4B) Where—

(a) overseas dividends or manufactured overseas dividends received by the overseas dividend manufacturer in any chargeable period fall to be matched, in accordance with regulation 10(1), against manufactured overseas dividends to which regulation 3(6), 5 or 5A applies that are paid by him in that period, and

(b) the gross amount of the overseas dividends or the manufactured overseas dividends is brought into account by the overseas dividend manufacturer as income for the purposes of income tax or corporation tax for that period,

relief under section 112 of the Taxation (International and Other Provisions) Act 2010 (deduction from income for foreign tax (instead of credit against UK tax)) ( 6 ) shall be given to the overseas dividend manufacturer in respect of any tax referred to in paragraph (1A) that is attributable to those overseas dividends or manufactured overseas dividends received. ” .

Insertion of new regulation 9ZA

6. After regulation 9 insert—

“ Entitlement to offsetting

9ZA. —(1) There shall be no entitlement to set off under regulation 9(1) in relation to overseas dividends or manufactured overseas dividends received by an overseas dividend manufacturer in any chargeable period if—

(a) the overseas dividends or the manufactured overseas dividends do not fall to be matched, in accordance with regulation 10(1), against manufactured overseas dividends paid by the overseas dividend manufacturer in that period, and

(b) the gross amount of the overseas dividends or manufactured overseas dividends is not brought into account in accordance with generally accepted accounting practice by the overseas dividend manufacturer as income for the purposes of income tax or corporation tax for that period.

This is subject to paragraph (2).

(2) Paragraph (1) does not apply if the overseas dividend manufacturer elects to bring into account the gross amount of the overseas dividends or manufactured overseas dividends received in any chargeable period as income for the purpose of calculating his liability to income tax or corporation tax for that period.

(3) An election under paragraph (2)—

(a) must be made in writing to Her Majesty’s Revenue and Customs,

(b) applies in relation to overseas dividends and manufactured overseas dividends received in the chargeable period in which the election is made and in subsequent periods, and

(c) may be revoked by notice in writing to Her Majesty’s Revenue and Customs with effect from the chargeable period in which the notice is given. ” .

Amendment of regulation 9A (offsetting of tax by overseas dividend manufacturers who are not United Kingdom intermediaries)

7. In regulation 9A (offsetting of tax by overseas dividend manufacturers who are not United Kingdom intermediaries)( 7 ) after paragraph (2B) insert—

“ (2C) But paragraph (2B) only applies to a case where the gross amount of the overseas dividends or, as the case may be, the manufactured overseas dividends received by the overseas dividend manufacturer in any chargeable period is brought into account as income for the purposes of income tax or corporation tax for that period. ” .