Income Tax Act 2007 section 587

Power for manufactured payments to be eligible for relief

Section 587 gives the Treasury the power to make exceptions to the normal tax rules on manufactured payments, so that certain recipients such as pension funds can receive the same tax exemptions on manufactured payments as they would on the real dividends or interest those payments represent.

• The Treasury may make regulations creating exceptions to the standard rules on how manufactured payments are taxed.
• The main purpose is to allow manufactured payments to be exempt from income tax in the hands of pension funds.
• The exemption applies where the actual dividends or interest that the manufactured payments represent would themselves have been exempt from income tax.
• This ensures that the use of stock lending or similar arrangements does not disadvantage pension funds by making otherwise tax-exempt income taxable.