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 !