Budget Notes

BN65 AVOIDANCE OF INCOME TAX USING MANUFACTURED PAYMENTS

Who is likely to be affected?

1. Individuals who pay manufactured payments as part of a scheme or arrangements to gain a tax advantage.

General description of the measure

2. Legislation will be introduced in Finance Bill 2008 to stop individuals avoiding income tax by making manufactured payments. Manufactured payments are payments representative of interest or dividends payable on securities, such as gilts or shares, arising in the course of a sale and repurchase ('repo') or stocklending arrangements.

Operative date

3. The legislation was announced by Ministerial statement on 31 January 2008 and will have effect on and after that date.

Current law and proposed revisions

4. Under current law, individuals who make manufactured payments are generally able to obtain relief for the payments against their general income. This has given rise to a range of avoidance schemes whose object is to secure relief for the payments against their general income.

5. The legislation will introduce a targeted anti-avoidance rule that denies relief for any manufactured payment paid as part of a scheme or arrangements where one of the main purposes is to secure a tax advantage.

Further advice

6. If you have any questions about this change, please contact Richard Rogers on 020 7147 2625 (email: richard.rogers@hmrc.gsi.gov.uk). Information about Budget measures is available on the HM Revenue & Customs website at www.hmrc.gov.uk