Corporation Tax Act 2010 section 796

Manufactured dividends: amounts exceeding underlying payments

Section 796 deals with the treatment of manufactured dividends where the amount paid exceeds the actual underlying dividend it represents, requiring the excess to be treated as a fee rather than a manufactured payment.

• Where a manufactured dividend exceeds the real dividend it represents, the excess amount is carved out from the manufactured payment rules.
• The excess is instead treated as a fee for tax purposes, which changes how it is handled for both the payer and the recipient.
• For the payer, the fee treatment may affect the relief available — for example, it may still qualify as a deductible trading expense.
• For the recipient (or the underlying owner of the securities, if different), the fee treatment may alter how the amount is taxed under corporation tax.