HM Revenue and Customs Brief 73/09
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Issued 1 December 2009
Finnish, Greek and Irish dividends
Claims by individuals for dividend tax credits in respect of dividends
received before 5 April 2008
Finnish, Greek and Irish dividends
If you receive dividends from a foreign company and your shareholding is less
than 10 per cent, for the 2008 09 tax year, the law entitles you to a dividend
tax credit equal to one ninth of the amount of the dividend provided that the
foreign company is not an offshore fund. (Dividends paid in respect of
shareholdings of 10 per cent or more do not qualify for the credit.)
Some taxpayers have claimed dividend tax credits for earlier years in respect
of their foreign dividend income. They say that judgements of the European Court
of Justice in relation to the systems of dividend taxation in some other Member
States indicate that the UK system was unlawful under the EC Treaty because it
treats UK and foreign dividends differently.
HMRC does not accept this argument in general. However, based on legal
advice, HMRC 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
If you received such dividends, you suffered potential double taxation from
the underlying tax on profits payable by the company and then again from the UK
income tax you paid on the dividend. However, unlike UK dividends there was no
dividend tax credit to give you 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 you might have to UK income tax.
This guidance tells you whether and how the change of approach will affect
How the change takes effect
If you received dividends from a company resident in Finland, Greece or
Ireland prior to 6 April 2008, you 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, however, to dividends from Irish investment funds which
are not chargeable to Irish tax on their relevant income or gains. These include
Irish International Financial Services Centre funds. Ask your financial advisor
or broker if you are not sure whether the Irish shares you hold are in this type
of fund, or check the information about taxation in the funds prospectus.
If you are a basic rate taxpayer, your dividend income is chargeable at the
dividend ordinary rate of 10 per cent. After the change the availability of the
dividend tax credit reduces the effective rate to nil.
If you are a higher rate taxpayer, your dividend income is chargeable at the
dividend upper rate of 32.5 per cent. After the change the availability of the
dividend tax credit reduces the effective rate to 25 per cent.
Foreign dividend income £9,000
Tax credit £1,000
10% on £10,000 = £1,000
Less tax credit £1,000
Total tax due = Nil
Foreign dividend income £90,000
Tax credit £10,000
32.5% on £100,000 = £32,500
Less tax credit £10,000
Total tax due = £22,500
How to make a claim
You can take some simple steps to claim back the tax you have overpaid.
- Our internet information about
Tax refunds and
reclaiming overpaid tax outlines the steps you need to take.
- You can contact your accountant or tax adviser if you have one.
- Write to your Tax Office to explain the situation.
If you are a self assessment taxpayer who wants to claim for the years 2003
04 and 2004 05, you need to make your claim by 31 May 2010.
If you pay all your tax through PAYE and you do not normally file a tax
return, you need to make your claim for 2003 2004 and 2004 05 by 31 January
If you have any queries in relation to this, please phone Andrea Pierce on
Tel 020 7147 2591.
About the Author
© Crown Copyright 2009.
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Article Published/Sorted/Amended on Scopulus 2009-12-10 12:56:58 in Tax Articles