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A conundrum facing remittance basis users and the dividend tax credit.
Everyone knows that the dividend tax credit was abolished with effect from 6 April 2016. However what is the position for a remittance basis user who received a foreign dividend before 6 April 2016 – one that qualified for a tax credit under the rules in ITTOIA 2005 s 397A to s 397C – but which is remitted to the UK in 2016-17 or later? Is the remittance basis user entitled to the tax credit in those circumstances? These were the questions I put to HMRC.
Analysis of the legislation
Under ITTOIA 2005 s 832(2) foreign dividends are taxed in the tax year of remittance and are subject to the tax rates at that time. This income is taxed as relevant foreign income under ITTOIA 2005 s 830 so the default income tax rates apply rather than the dividend tax rates.
Before 6 April...
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