UK citizen is now non-resident. If they receive dividends from a UK company over the £2k tax free threshhold, is the 7.5% ordinary tax rate treated as being paid?
An example in a book by 'Golding and Connelly advising on British Expats' suggested not but I think the legislation says otherwise. ITTOIA 2005 s399.
Thanks for any confirmation!!
Replies (7)
Please login or register to join the discussion.
There's a 7.5% credit so effectively no tax to pay for a BR tax payer. Income disregard rules likely to apply at higher levels
If its own company it could still be taxable in UK even if non resident under certain conditions
1. There's no deemed tax credit - has the client actually paid the 7.5%%, in (NB: not'for', but 'in') the period in which the offset is required?
2. Where is the client resident? Don't assume that the state of residence uses UK tax principles. Some states don't give a credit against their own taxes. Instead, they exempt income that's foreign source, or income that's foreign source and already taxed. Or they use 'exemption with progression', so a proportionate part of their equivalent of personal allowance is used against the foreign income, and part of their basic rate band, and part of the higher rates. You need to know how their tax system works.
3. Is there a double tax treaty between the state of residence and the UK, and if so what does it say about dividends?
I believe that an election can be made
You can choose to have UK dividends deemed as "excluded income" however this does mean that you lose the right to the tax free allowance.
So it is now a choice if you have other UK derived income as to what you choose for the greatest tax benefit. i.e. tax is paid from £0.00 on other income for example rental profits
Yes they may be entitled to a tax credit if they are non-resident. I don't think ITTOIA 2005 s399 was considered when the rules on dividends were changed and the 0% dividends allowances created.