Non-res and dividends

22 April 2014

Issue: 4448 / Categories: Forum & Feedback

Is the tax liability on close company dividends when paid to non-residents still limited to the tax credit?

The statutory residence test (FA 2013 Sch 45 para 133) inserts the anti-avoidance legislation of s 401C (“temporary non-residents”) into ITTOIA 2005 Part 4.

I have read commentary regarding this which says that the old planning for UK close company dividends still works for UK residents who receive dividends or distributions during a period that covers a whole tax year of non-residence.

This is because UK dividends are taxed in the year of receipt as UK-source income regardless of residence status. However for non-residents UK dividends are treated as “disregarded income” so the UK liability is limited by ITA 2007 s 811 to the 10% tax credit.

HMRC’s Guidance Note: Statutory Residence Test (SRT) at pages 76 to 77 is different and suggests that any dividend or distribution paid to a material participator as defined in ITTOIA 2005 s 401C and who...

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