HC Deb 06 July 2004 vol 423 c710

Manufactured dividends and interest

1.45 pm
The Paymaster General (Dawn Primarolo)

I beg to move, That provision may be made in the Finance Bill in relation to payments, and deemed payments, by companies of—

  1. (a) manufactured dividends,
  2. (b) manufactured interest, or
  3. (c) manufactured overseas dividends,
within the meaning of Schedule 23A to the Income and Corporation Taxes Act 1988. The resolution covers provisions in the Finance Bill that prevent companies from avoiding corporation tax by entering into a range of artificial arrangements that involve manufactured payments.

The arrangements vary in detail, but usually involve claiming tax relief for a manufactured payment while arranging for any counterbalancing income or gains to escape taxation in some way. The clause works by introducing an unallowable purpose rule for manufactured payments. The rule denies tax relief for the manufactured payment to the extent that payment is attributable to the unallowable purpose.

Where tax avoidance is the main, or one of the main, motives behind a company entering into these arrangements, it will be denied a tax deduction, thereby defeating the avoidance. The measure will apply to manufactured payments made on or after 2 July 2004, subject to transitional provisions for payments made under arrangements already in place.

Question put and agreed to.