.png)
.png)
Individuals who receive dividends from a foreign company and whose shareholding is less than 10% for the 2008/09 tax year are entitled to a dividend tax credit provided that the foreign company is not an offshore fund.
Some taxpayers have claimed dividend tax credits for earlier years in respect of their foreign dividend income on the basis that judgments of the European Court of Justice have shown the UK system was unlawful under the EC Treaty because it treats UK and foreign dividends differently.
HMRC do not accept this argument in general but, based on legal advice, they will accept claims for some earlier years in relation to dividends from Finland and Greece, and certain Irish dividends.
In these cases a form of corporation tax is paid in the other country and there is no withholding tax on outbound dividends.
Taxpayers who received such dividends will have suffered potential double taxation from the underlying tax on profits payable by the company and then again from the UK income tax paid on the dividend.
However, unlike UK dividends there was no dividend tax credit to provide partial relief from the double taxation.
Also, there was no foreign withholding tax which, after credit for foreign tax credit relief is given, has the effect of removing or significantly reducing any liability to UK income tax.
HMRC have published Revenue and Customs Brief 73/09 to explain that taxpayers who received dividends from a company resident in Finland, Greece or Ireland before 6 April 2008 may claim a dividend tax credit equal to one ninth of the amount of the dividend for the 2007/08 and earlier tax years, back to 2003/04.
This does not apply to dividends from Irish investment funds which are not chargeable to Irish tax on their relevant income or gains.
Self assessment taxpayers who want to claim for the years 2003/04 and 2004/05 need to claim by 31 May 2010.
Taxpayers who pay all their tax through PAYE and do not normally file a tax return, need to submit their claims for 2003/04 and 2004/05 by 31 January 2011.
Does anyone know what HMRC's legal advice is likely to say and why these claims are restricted only to dividends from Finland, Ireland & Greece? Is it because there is no tax credit available on these dividends in those countries and no withholding tax charged, whereas other EEA territories either do have a tax credit or do charge withholding tax?