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HMRC internal manual

International Manual

UK residents with foreign income or gains: dividends: Unilateral relief - direct tax


Allow unilateral relief to portfolio shareholders and direct investors for direct tax charged on a dividend. See the glossary at INTM164010 for the meaning of these terms.

TIOPA10/S13 allows tax credit relief to a shareholder only where the foreign tax is directly charged on the dividend and the whole of such tax represents tax which neither the company nor the recipient would have borne if the dividend had not been paid.

Although the foreign tax deducted from a dividend may have the appearance of being directly charged on the dividend and therefore available for credit, it may be tax which is excluded from credit because it in fact represents the paying company’s tax on its profits. Tax deducted from dividends paid by Guernsey, Jersey and Isle of Man companies is of this kind. Credit relief is not due but the foreign tax may instead be deducted under TIOPA10/S112 in arriving at the amount chargeable to UK tax.