Corporation Tax Act 2010 section 797

Manufactured overseas dividends: amounts exceeding underlying payments

Section 797 deals with what happens when a manufactured overseas dividend (MOD) paid by a company exceeds the actual overseas dividend it is meant to represent.

• Where a manufactured overseas dividend exceeds the real overseas dividend it represents, the excess amount is stripped out of the manufactured payment rules
• The excess is instead treated as a fee rather than as part of the manufactured dividend
• This reclassification as a fee can affect the tax relief available to the payer, the taxability of the recipient (or the underlying owner of the securities, if different), or both
• Treating the excess as a fee does not prevent it from qualifying for relief as a trading expense or other deductible cost under normal corporation tax principles