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HMRC internal manual

International Manual

UK residents with foreign income or gains: dividends: Determination of rates of foreign underlying tax - Foreign Income - inclusive rates - examples

Exceptionally, CTIAA Underlying Tax Group will compute an inclusive rate, that is the underlying rate plus the rate of direct tax scaled down as in the case of dividends paid by a Jamaican company (seeDT10553). For a dividend into the UK this is likely to have been at the request of the company.

An inclusive rate is computed as in the following example

Direct tax = 5%

Agreed rate of underlying tax = 24%

Inclusive rate = 5%(100 - 24) + 24 = 27.8%

If an inclusive rate of tax has been calculated the starting point for the UK measure of the foreign income is the net dividend after deduction of the foreign direct tax.


Gross dividend 200,000
Direct tax (5%) 10,000
Underlying rate 24%
Inclusive rate (5%(100 - 24) +24) 27.8%
Foreign Income computation £
Net dividend 180,000
Gross at 27.8% 69,307
Foreign income 249,307
Corporation Tax at 30% 74,792
Less tax credit relief (direct & underlying tax) 69,307
Net Corporation Tax payable 5,485