Tax tango

More and more of my clients now seem to be in receipt of foreign dividends and I am unsure as to how much I can claim by way of tax credit relief particularly as the 10% non-payable tax credit is now in force.

For example take a Spanish dividend having had 18% foreign tax deducted from a dividend paid to a client in 2007/08.

HMRC’s Helpsheet 263 states that foreign tax credit relief can be claimed up to the amount of UK tax chargeable on the dividend so for my higher-rate taxpayer liable at 32.5% on dividends I therefore claimed the full foreign deduction.

However HMRC came back with a restriction because the double taxation agreement limit on Spanish dividends is only 15%.

I appreciate that we are not talking about a lot of tax here but I would like to know the...