Income Tax Act 2007 section 918

Manufactured dividends on UK shares: Real Estate Investment Trusts

Section 918 deals with the income tax obligations that arise when someone pays a manufactured dividend that represents a property income dividend (PID) paid by a UK Real Estate Investment Trust (REIT).

• When a manufactured dividend represents a PID paid by a UK REIT out of its property rental business, the payer must deduct income tax at source as if it were the REIT itself paying the actual dividend.
• If the payer is UK resident or operates through a UK branch or agency, the same withholding tax rules that apply to actual PIDs apply to the manufactured dividend, with necessary modifications.
• Where the payer is non-UK resident or a UK company operating through an exempt foreign permanent establishment, the Treasury may make regulations requiring the UK recipient to account for and pay the income tax instead (a "reverse charge").
• The amount of income tax to be accounted for — whether by the payer or the recipient — equals the amount that would have been deducted had the payment been an actual PID, and the gross amount of the manufactured dividend is taken to be the same as the gross amount of the real dividend it represents.