Share Incentive Plan - Foreign dividends

Share Incentive Plan - Foreign dividends

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A personal tax client invests monthly into an HMRC approved Share Incentive Plan.    Dividends on the shares are reinvested within the SIP to acquire additional shares.  The dividends are less than £1,500 per annum.

The shares within the SIP are actually shares in the French parent company and French withholding tax is deducted at 25% when dividends are paid.

At a later date, various forms are completed by the individual to claim a refund of French withholding tax, being the difference between the 25% withheld when the dividend was paid and the double tax treaty rate which is 15%. 

Example

£1,000.00   Dividend from French company - Paid Sept 2009

(250.00)      French withholding tax

£750.00      Net dividend (reinvested in SIP to acquire additional shares)

£100.00      Refund received say Sept 2011 (paid directly into employees bank account i.e. NOT paid into the SIP)

Question

Does the £100.00 receipt in the 2011/12 tax year need to be reported on the 2011/12 Self Assessment Tax Return?   If so, why?

Or is it exempt from UK income tax?    If exempt, why?

Any comments much appreciated !

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