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Where Taxpayers and Advisers Meet

Non-resident dividends

jason13
Posts:153
Joined:Mon Mar 28, 2011 2:02 pm
Re: Non-resident dividends

Postby jason13 » Thu Apr 12, 2018 9:14 pm

Dividend allowance £5,000.

Hence income tax at 7.5% on [6,000 - 5,000].
Yes, my bad, I was looking for the wrong thing. I missed the line saying "minus 7.5% tax treated as paid on dividends from UK companies (not repayable) £450.00"

It seems SelfTax gets the calculation wrong though because it treats the non repayable amount as repayable.

jason13
Posts:153
Joined:Mon Mar 28, 2011 2:02 pm

Re: Non-resident dividends

Postby jason13 » Thu Apr 12, 2018 9:17 pm

The legislation says "includes a distribution of a company". How is that defined? Does that include dividends from UK-based OEICs and similar funds which are put in box 5 (other dividends) rather than box 4 (Dividends from UK companies)?
maths, you didn't respond to that part of my message. I'm curious since the legislation refers to "a company".

jason13
Posts:153
Joined:Mon Mar 28, 2011 2:02 pm

Re: Non-resident dividends

Postby jason13 » Tue Apr 17, 2018 2:01 pm

I missed the line saying "minus 7.5% tax treated as paid on dividends from UK companies (not repayable) £450.00"

It seems SelfTax gets the calculation wrong though because it treats the non repayable amount as repayable.
Actually, SelfTax seems to be right. I'm getting the same result with ABC SA.

It's interesting though. The notional 7.5% is given on the full amount of dividends and because of the 5000 dividend allowance not all dividend income may result in tax. So if you have a non-resident with some earned income plus let's say £6000 in UK dividends, the income tax is decreased by £450 (£6000 * 7.5%), yet only £75 of tax was due on the dividends (7.5% of 6000-1000). So while it's not repayable, it can decrease the tax liability if there's other taxable income.

I guess this works as designed but still seems a bit surprising.

jason13
Posts:153
Joined:Mon Mar 28, 2011 2:02 pm

Re: Non-resident dividends

Postby jason13 » Tue Apr 17, 2018 2:06 pm

The legislation says "includes a distribution of a company". How is that defined? Does that include dividends from UK-based OEICs and similar funds which are put in box 5 (other dividends) rather than box 4 (Dividends from UK companies)?
Putting something in box 5 causes the "7.5% tax treated as paid" to show up but amounts in box 4 do not.

maths wrote:
Under UK domestic tax law (not the double tax agreement) when a non-resident receives a UK source dividend the non-resident is treated for UK tax purposes as having paid income tax at the dividend ordinary rate on the amount of the dividend.
So if I receive dividends from a UK company I get the "7.5% tax treated as paid" but if I invest in a UK source unit trust or OEIC I do not, which means that some UK source dividends are taxed for non-residents. Is this ground for appeal or is the current behaviour what was intended? It certainly seems unfair to me.


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