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INTM164540 | UK residents with foreign income or gains: dividends: Paying agents - examples

From HM Revenue & Customs · International Manual

These examples apply for payments up to April 2001. The paying agent scheme was abolished from April 2001.

Example 1 - Where no adjustment is needed

The person’s marginal rate on the foreign dividend is the lower rate, the tax credit relief due is less than the tax at the marginal rate and the paying agent has deducted UK Income Tax at the lower rate less provisional credit for the foreign tax.

---£
Gross foreign dividend--100.00
Less foreign withholding tax at 15%--15.00
---85.00
Less UK tax at 5% (that is lower rate 20% less credit at 15% on 100)--5.00
Amount received by shareholder--80.00
Claimant’s total income consists of---
--£-
UK untaxed interest-4,000-
Foreign dividend-100-
--4,100-
PA due = 3,445---
-£--
Total income4,100--
Less PA3,445--
-655--
Tax thereon (655 at 20%)--131.00
--£-
Total income-4,100-
Less foreign income-100-
Reduced total income-4,000-
Less PA-3,445-
--555-
Tax thereon (555 at 20%)--111.00
Tax at marginal rate on foreign dividend--20.00
Tax on foreign dividend (100 at 20%)--20.00
Less credit allowable--15.00
---5.00
Less UK tax deducted by paying agent--5.00
No adjustment needed--NIL

Example 2 - Where a repayment is due

Tax at the person’s marginal rate on the foreign dividend is less than the credit relief due and the provisional credit allowed by the paying agent.

--£
Gross foreign dividend-100.00
Less foreign withholding tax at 15%-15.00
--85.00
Less UK tax at 5% (that is lower rate 20% less credit at 15% on 100)-5.00
Amount received by shareholder-80.00
Claimant’s total income consists of--
-£-
UK untaxed interest3,400-
Foreign dividend100-
-3,500-
PA due = 3,445--
Total income3,500-
Less PA3,445-
-55-
Tax thereon (55 at 20%)-11.00
Total income3,500-
Less foreign income100-
Reduced total income3,400-
Less PA3,400-
-NIL-
Tax thereon-NIL
Tax at marginal rate on foreign dividend-11.00
Tax on foreign dividend (at marginal rate)-11.00
Less credit allowable-11.00
--NIL
UK tax deducted by paying agent-5.00
Repayment due-5.00
The unrelieved foreign tax of 4.00 (15.00 - 11.00) is not repayable.--

The unrelieved foreign tax of 4.00 (15.00 - 11.00) is not repayable.

Example 3 - Further tax due

Tax at the person’s marginal rate on the foreign dividend is greater than the credit relief due and the provisional credit allowed by the paying agent.

---£
Gross foreign dividend--100.00
Less foreign withholding tax at 15%--15.00
---85.00
Less UK tax at 5% (that is lower rate 20% less credit at 15% on 100)--5.00
Amount received by shareholder--80.00
Claimant’s total income consists of---
--£-
UK trading profits-30,000-
Foreign dividend-100-
--30,100-
PA due = 5,910---
Total income30,100--
Less PA5,910--
-24,190--
Tax thereon2,500 at 20%-500.00
Trading profits21,200 at 25%-5,300.00
-390 at 40%-156.00
Foreign dividend100 at 40%-40.00
---5,996.00
Total income-30,100-
Less foreign income-100-
Reduced total income-30,000-
Less PA-5,910-
--24,090-
Tax thereon (2,500 at 20%, 21,200 at 25%, 390 at 40%)--5,956.00
Tax at marginal rate on foreign dividend--40.00
Tax on foreign dividend (100 at 40%)--40.00
Less credit allowable--15.00
---25.00
Less UK tax deducted by paying agent--5.00
Further tax due--20.00