Foreign dividend tax credits
New guidance has been published relevant to taxpayers who have 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 a foreign company which commenced with the 2008-09 tax year.
Following this change, HMRC have 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 the recipients of dividends from Finnish and Greek companies and for certain Irish dividends (not for dividends which are not chargeable to Irish tax). This is because a form of corporation tax is paid in these countries 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.
Taxpayers who file self assessment returns who want to claim for the 2003-04 and 2004-05 tax years need to make a claim by 31 May 2010. Taxpayers who do not normally file a tax return (e.g. pay tax due using PAYE) need to make a claim for 2003-04 and 2004-05 tax years by 31 January 2011.