Income Tax Act 2007 section 603

Deemed deductions of tax

Section 603 treats deductions of tax as having been made in specified circumstances involving sale and repurchase arrangements for securities, covering payments representative of property income distributions, periodical interest on UK securities, and overseas dividends.

• When securities are subject to sale and repurchase arrangements, certain payments made during the arrangement are treated as "manufactured" payments that stand in for the real distributions or interest
• The section deems tax deductions to have been made on these manufactured payments, even though no actual deduction has taken place, ensuring the tax treatment mirrors what would have happened had the original securities been held throughout
• The types of payment covered include payments representative of property income distributions (PIDs), periodical payments of interest on UK securities, and overseas dividends on overseas securities
• This deemed deduction mechanism prevents anomalies that could otherwise arise from the interaction between the manufactured payments rules and the rules governing the tax treatment of price differentials on sale and repurchase transactions