I am dealing with a new UK small company which has been formed recently and preparing the first set of accounts.
There are 4 directors, all of which have 25% of the shares in the company.
3 of the director/shareholders are UK residents, however the 4th one is resident in Canada.
Each of them received a dividend in the year paid out of profits of the company.
What are the implications of this for the director resident in Canada? (He was born in the UK by the way and lived here and paid tax here under PAYE for most of his life).
Presumably he must complete a UK tax return and the dividend income reported on that? And if that is the case, does he still get a full UK personal allowance against which he can offset this income?
If so then there will be no UK tax for him to pay, as we are looking at a net dividend of £5,000. As far as I am aware, he has no other UK income.
Also, I note there is a Double Taxation relief form on HMRC's site https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/373910/canada-individual.pdf
I'm a little confused though. Does he need to complete
a. Both a SA return and the Double Taxation relief form?
b. Just one of these?
Any help would be much appreciated.
Replies (12)
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It is Christmas (nearly)
And I am feeling lucky.
The OP should perhaps google disregarded income.
No
It is not correct. He receives a uk dividend and has no additional uk compliance to do if he is not uk resident, just as if he owned shares in BT or BP and received a dividend.
That is what it says in the section you pasted above, you should discuss with your accountant if you do not understand.
Have a read of
HMRC6 (just google it, it's a manual - make sure you get the current version).
HMRC6 and current version?
HMRC6 and current version should no longer be found in the same sentence. The guidance that was in HMRC6 is replaced by that in RDR1/RDR2/RDR3 since the statutory residence test was introduced, and the OP still clearly needs an accountant.
HMRC tosh
I have now called HMRC's tax helpline and they have advised that as he is a director of a UK company then he does definitely have to complete a UK Self Assessment return, but that he will not have to repay the notional tax credit applied to his dividend income.
Utter tosh. HMRC are talking rubbish. Speak to an accountant.
Balderdash!
As always, HMRC's "Help" line is completely incorrect.
As a director of a UK company he does not have any obligation to complete an SA tax return, unless HMRC issue him with a notice to deliver.
It would be a complete waste of everybody's time for HMRC to issue such a notice, and he could be within his rights to make an application under section 8B, although it would probably then be less painful to simply file the return.
As a non-resident the dividends from the UK company are disregarded income and the NOTIONAL tax credit is an irrelevance. He does not have a UK tax liability.
Go and see an accountant!
@froth
HMRC are talking rubbish. There is no statutory requirement for an individual to complete a self - assessment tax return merely by virtue of being a director. To say this topic has been death on here is a vast understatement