Income Tax Act 2007 section 647

Makers of manufactured payments

Section 647 ensures that where a person "manufactures" a payment on securities, the tax charge under the manufactured payments rules takes priority over any charge under the accrued income scheme.

• When a person buys securities without accrued interest and sells them on under a manufactured payments contract, they are excluded from the accrued income scheme on both the purchase and the sale
• A manufactured payments contract arises where the seller must pay a compensating amount representative of interest on UK securities or of an overseas dividend on overseas securities
• The exclusion from the accrued income scheme applies fully only where the nominal value of the securities sold on equals or exceeds the nominal value of those originally acquired; where it falls short, section 663 provides for a partial reduction instead
• UK securities cover government, local authority and other public authority securities and those of UK resident bodies (but not shares in UK resident companies), while overseas securities cover equivalent instruments issued by non-UK entities (including shares in non-UK resident companies)