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Where Taxpayers and Advisers Meet

Foreign Dividend Treatment 2016/17 Tax Year

dowles
Posts:12
Joined:Thu Feb 11, 2016 3:06 pm
Foreign Dividend Treatment 2016/17 Tax Year

Postby dowles » Fri May 26, 2017 1:39 pm

Hi
In the 2016/2017 tax year I earned £6441 in foreign dividends (from US companies) and £878 in UK dividends for a total of £7,320 for the tax year. When entering the foreign dividends into the government website i put the gross figure of £6441 and then also put that I had paid £994 (15%) of tax on these (which has already been taken off). I am a lower rate tax payer and when my dividend tax was computed it came out as owing an additional £99. This came about as my net dividends received is computed as (6441-994+878 = ) £6,325 and thus £5000 was tax free and the remaining £1325 was subject to 7.5% tax to give £99

So in total on £7,320 of dividends i have paid tax of £1093 when i expected to have paid 7.5%*(7320-5000)=£174

Does this seem correct? If not then how do I claim back the extra £919 that I have overpaid in tax as its not clear on the tax form how i do this?

Thanks
Scott

robbob
Posts:3228
Joined:Wed Aug 06, 2008 4:01 pm

Re: Foreign Dividend Treatment 2016/17 Tax Year

Postby robbob » Sat May 27, 2017 10:43 am

No replies to this one - damn no one seems to like foreign divis challenge.


Ok here is how i would guess it should work - hopefully if i am talking rot someone will correct me. It's all got a little confusing with overseas divis the last few yeaers.


So in total on £7,320 of dividends i have paid tax of £1093 when i expected to have paid 7.5%*(7320-5000)=£174
I would agree with you - i would expect gross divis to be 7320 and uk tax due to be £174.00 - before overseas credit

The overseas tax credit i would expect should be restricted to the tax due on that same income line so £174.00 claimable overseas credit.

Tax liability nil.

Then again i may be talking rot :) :(

I suspect the problem here if i am right is that

(1) the 994 should not be reducing the overseas dividend amount

(2) you are not receiving the "credit for overseas tax" you will need to complete the equivalent of box 2 on F1 to ensure the overseas credit is claimed, albeit the amount is restricted to the uk tax due.

(3) the full amount of overseas tax should also be included in column C page F2

HMRC helpline should be able to advise how to convert actual tax return boxes to online form entry





Confirmation from foreign notes page 6 that you cannot claim Foreign Tax Credit Relief for income covered by the dividend allowance.
From 6 April 2016, if you haven’t paid tax because you’re within the Dividend Allowance then you can’t claim Foreign Tax Credit Relief (FTCR) on that income

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Foreign Dividend Treatment 2016/17 Tax Year

Postby maths » Sat May 27, 2017 7:05 pm

Robbob is the whiz kid when it comes to this sort of stuff so I hesitate to comment. But here goes.

If you are a basic rate taxpayer with income against which your personal allowance has been fully offset but adding the dividend income you remain a basic rate taxpayer then any dividend income is in principle subject to tax at 7.5%.

The dividend allowance is 5,000.

One issue is whether the taxpayer can offset the 5,000 in the most tax efficient manner.

Assuming so, then the 5,000 would first absorb the 878 leaving [5,000 - 878] ie 4,122 for offset against the foreign dividends of 6,441 giving 2,319.
2,319 then taxed at 7.5% giving 173 reduced to zero by foreign tax credit of 173.

Alternatively, if the 5,000 absorbs the 6,441 first then 1,441 remains taxed at 7.5% but again reduced to zero due to foreign tax credit.This leaves the 878 taxed at 7.5% ie 66.

robbob
Posts:3228
Joined:Wed Aug 06, 2008 4:01 pm

Re: Foreign Dividend Treatment 2016/17 Tax Year

Postby robbob » Tue Jun 20, 2017 12:05 pm

if you are looking at this thread for enlightenment it is probably worth checking the following thread also for information contained there as the issue is very similar in nature.

http://www.taxationweb.co.uk/forum/topic51911.html


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