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A bigger divi?

05 December 2007
Issue: 4137 / Categories: Forum & Feedback
What level of tax credit should be given for a foreign dividend?

Our personal tax return software is restricting the foreign tax credit relief on dividends from foreign companies to UK resident individuals to 10%. This is regardless of the fact that (a) the relevant double tax agreement states that the maximum rate for which credit can be taken on 'dividends paid to portfolio investors' per the double tax agreement is a rate higher than 10% (notes on foreign pages of the 2006-07 self assessment return FN24) and (b) that all UK and foreign dividend income of the taxpayer concerned is charged at 32.5% in his computation.

The response from our software house is that 'the HMRC test case generator' (i.e. the software that HMRC issue for software houses to test their software against) gives the same result as their calculation — that is it restricts the tax credit to 10% regardless of the higher rate of tax paid by the...

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