Position. Client UK citizen resident only in the USA. UK company pays him a salary of £8,500 and dividends for the rest.
I have been testing the calculations on my tax system for 2018/19. It appears from the tests that when his dividends reach about £46,275 his personal allowance disappears and is replaced by an exclusion of the dividends and thus tax at basic rate is charged on the whole of the salary. Before that change the client ends up with a basic and higher rate liability on the dividends relieved by 7.5% of the whole of the dividends. I am having difficulty finding the legislative basis for this. Normally the personal allowance doesn't suddenly disappear but only starts doing so when income exceeds £100k. Just to confuse me further The Double Tax Treaty seems to indicate at Article 10 2 (a) that if, in these circumstances, you own more than 10% of the dividend paying shares the UK cannot charge tax at more than 5% of those dividends.
Can anyone point me at the legal stuff involved and/or explain what is going on here?