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HMRC internal manual

International Manual

HM Revenue & Customs
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UK residents with foreign income or gains: dividends: Determination of rates of foreign underlying tax - Foreign Income - standard cases - example

CTIAA Underlying Tax Group, Yorke House, Nottingham normally only computes a rate of underlying tax (see INTM164010 paragraph (d)) and does not usually require evidence of or comment on the direct tax (see INTM164010 paragraph (c)) charged on a dividend. Exceptionally they will compute an inclusive rate (see INTM164500).

In a standard case where the rate relates only to underlying tax, then the starting point of the calculation of the foreign income is the gross dividend before deduction of any foreign direct tax.


Gross dividend   200,000
Direct tax (5%)   10,000
Underlying rate (as notified by    
UTG)   24%  
  Foreign Income computation    
  Gross dividend 200,000  
  Gross at 24%    
(200,000/0.76 x 0.24)  
  Foreign income 263,157  
  Corporation Tax at 30%   78,947
  Less Tax credit relief    
  Underlying tax 63,157  
  Direct tax 10,000  
  Net Corporation Tax payable   5,790

The starting point in the Foreign Income computation must be the net dividend in some other cases: see INTM164500 onwards.