Client is shareholder in family company and receives dividend income. In 2010/11 he made a loss on an EIS investment. I want to carry back the loss to 2009/10 when he was a higher rate tax payer on his dividend income.
I have run the tax comp for 2009/10 again with a loss in it so that I can see how much repayment to claim, and it looks wrong to me. Dividends are obviously the top slice of income so the tax saving is 32.5%. But then the 10% tax credit has not been reduced by the corresponding amount, giving an effective rate of 42.5% on the losses.
Can this be right?