Corporation Tax Act 2010 section 791

Treatment of payer of manufactured overseas dividend

Section 791 deals with the corporation tax treatment of a company that pays a manufactured overseas dividend (MOD).

• When a company pays a manufactured overseas dividend, the payment is treated as a tax-deductible expense for corporation tax purposes, similar to how the real overseas dividend would have been treated had the company been the actual payer of that dividend.
• A manufactured overseas dividend arises when a company that has borrowed or sold overseas shares is required to pass on to the lender or original holder an amount equivalent to the overseas dividend paid on those shares during the borrowing or sale period.
• The tax treatment ensures that the payer of the manufactured overseas dividend is not disadvantaged compared with paying a genuine overseas dividend, maintaining consistency in how such payments reduce taxable profits.
• This provision was originally based on paragraph 4 of Schedule 23A to the Income and Corporation Taxes Act 1988 and was subsequently amended by Finance Act 2013.