Foreign dividend tax credits
HMRC have reissued previous guidance to remind taxpayers they need to take action if they received dividends from companies in Finland, Greece and Ireland prior to 5 April 2008. This guidance follows changes to the UK rules for dividends received from foreign companies with effect from the 2008-09 tax year.
Following this change, HMRC received claims from taxpayers for dividend tax credits from foreign companies for earlier years. The taxpayers in question cite a number of European Court of Justice decisions which they say demonstrate that the UK rules prior to 5 April 2008 were unlawful as they treated UK and foreign dividends differently.
Whilst HMRC does not accept this argument, it has, following the receipt of legal advice, confirmed that it will accept claims prior to 5 April 2008 from Finland and Greece and for certain Irish dividends (not for dividends which are not chargeable to Irish tax). This is because in these countries a form of corporation tax is paid in the other country and there is no withholding tax on outbound dividends.
Taxpayers may claim a dividend tax credit equal to one ninth of the amount of the dividend for the tax years from 2007–08 back to 2003–04.