What is the use of checkbox on Foreign page?

Foreign Dividend Tax Credit checkbox (Box E)

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Dear All,

As you are aware that From April 2016, a new tax-free dividend allowance was introduced and Foreign dividends will no longer qualify for UK dividend tax credits and there will no longer be the need to gross-up any qualifying dividend when working out the UK tax due. My query is that, if the credit is not allowable then what is the use of checkbox E "To claim Foreign Tax Credit Relief put ‘X’ in the box" on Foreign Form (SA-106).

Also, I want to know what would be the taxable dividend in this case? Gross or Net?

Any help would be appreciated.

Thanks in Advance

Replies (17)

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By Tim Vane
10th Jul 2017 15:58

Foreign tax credit relief has absolutely nothing to do with the dividend tax credit.

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By halblackburn
10th Jul 2017 16:03

Because of Box 2 on page F1.

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By Matrix
10th Jul 2017 16:04

The foreign dividend is still grossed up and the foreign tax credit claimed. These rules have not changed.

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By GW
10th Jul 2017 16:08

Foreign Tax Credit relief is double taxation relief rather than dividend tax credit.

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Replying to GW:
Tornado
By Tornado
29th Jul 2017 16:26

I think this is correct, although the distinction between 'Tax Credits' and 'Tax Deducted/Witheld' needs to be made. Foreign dividends usually have Tax Deducted/Witheld (actual tax deducted) and not Tax Credits which are notional and don't exist.

One point to remember is that HMRC are not going to pay back any of the foreign tax deducted, but will allow it to be set-off against any UK Tax that arises on the same source to the extent of the UK liability on that source.

For many people in 2016/17, the total income from all dividends might be under £5,000 in which case although foreign tax may have been deducted, there is no UK liability on any dividend income so the foreign tax deduction is not available to use against UK tax on dividends. No entry is applicable in Box F1 2 (I think the tax software would ignore any entry anyway).

I guess that if all Dividends amounted to say £10,000, then a tax liability of say £5,000 will arise at 7.5% (assume basic rate) against which the foreign tax deduction can be claimed. If the foreign tax deductions amount to say £500 and the tax liability on all Dividends amounts to £375 then £375 is the figure to put into Box F1 2. (I also suspect that the Tax Software would also ignore any amount over £375).

Bearing in mind Box F1 2 is really part of a paper form, it is relevant if you are submitting a paper Return but largely unnecessary for an electronic submission.

I have not yet dealt with my clients who have substantial foreign dividends to see if this theory is correct, so the experiences of anyone who has already done this would be useful.

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By vijay.capsitech
10th Jul 2017 16:10

Please refer this link, It says No tax credit of tax paid on Foreign Dividend Income:

https://www.gov.uk/government/publications/calculating-foreign-tax-credi...

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Replying to vijay.capsitech:
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By Matrix
10th Jul 2017 16:14

See Tim's initial reply. There are plenty of examples for claiming the foreign tax credit in the link you sent.

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Replying to Matrix:
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By vijay.capsitech
10th Jul 2017 16:22

Matrix wrote:

See Tim's initial reply. There are plenty of examples for claiming the foreign tax credit in the link you sent.

Sorry for the trouble, but I'm actually confused with this para:

Foreign dividends
From April 2016, a new tax-free dividend allowance was introduced. The Dividend Allowance factsheet gives more information.

Foreign dividends will no longer qualify for UK dividend tax credits and there will no longer be the need to gross-up any qualifying dividend when working out the UK tax due.

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Replying to vijay.capsitech:
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By Matrix
10th Jul 2017 18:25

Before the dividend tax credit was abolished a UK tax credit could be claimed in addition to the foreign tax, provided it did not exceed the UK tax. The calculation was quite complicated. You may have to tick a box on your software to claim the foreign tax, have you done this?

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By vijay.capsitech
10th Jul 2017 16:24

I have tried some software, they are also not showing any credit of foreign dividend tax on Computation

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RLI
By lionofludesch
10th Jul 2017 16:34

Foreign Tax Credit is about credit for Foreign Tax rather than a Tax Credit for Foreign Income.

A subtle difference - but it's there.

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By Abacus Finch
25th Jul 2017 08:52

My father in law, who is a retired accountant, has just completed his 2016-17 return with US dividends that have withholding tax taken. He says he had to put in the gross amount of the US dividend, and the tax withheld, and swears he ticked the box to claim foreign tax credit relief but says at the end the comp doesn't show any.
Anyone any thoughts on what else he should have done?

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Replying to Abacus Finch:
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By Wanderer
25th Jul 2017 09:27

Abacus Finch wrote:

Anyone any thoughts on what else he should have done?

Complete Box 2 on page F 1.
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By Abacus Finch
25th Jul 2017 12:49

I think it was his understanding that this only needed to be filled in if he was calculating the tax, which he wasn't

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Replying to Abacus Finch:
RLI
By lionofludesch
25th Jul 2017 13:02

Abacus Finch wrote:

I think it was his understanding that this only needed to be filled in if he was calculating the tax, which he wasn't

Ah! Well, he was wrong.

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Replying to Abacus Finch:
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By Wanderer
25th Jul 2017 13:10

Completely understand that, the wording on the TR is "If you are calculating your tax, enter the total Foreign Tax Credit Relief on your income".

Problem is if you follow that advice & don't complete the box you won't get the FTCR!

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By Abacus Finch
25th Jul 2017 15:13

Especially considering the notes say:
"You don’t have to work out the FTCR yourself. We’ll do this for you if you complete other relevant boxes and send your tax return by the filing date. Only fill in box 2 if you want to calculate the FTCR yourself."

So this is incorrect? Harrumph, no wonder it didn't work, the poor old chap had no chance.

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