INTM164540 - UK residents with foreign income or gains: dividends: Paying agents - examples
These examples apply for payments up to April 2001. The paying agent scheme was abolished from April 2001.
Example 1 - Where no adjustment is needed
The person’s marginal rate on the foreign dividend is the lower rate, the tax credit relief due is less than the tax at the marginal rate and the paying agent has deducted UK Income Tax at the lower rate less provisional credit for the foreign tax.
| - | - | - | £ |
|---|---|---|---|
| Gross foreign dividend | - | - | 100.00 |
| Less foreign withholding tax at 15% | - | - | 15.00 |
| - | - | - | 85.00 |
| Less UK tax at 5% (that is lower rate 20% less credit at 15% on 100) | - | - | 5.00 |
| Amount received by shareholder | - | - | 80.00 |
| Claimant’s total income consists of | - | - | - |
| - | - | £ | - |
| UK untaxed interest | - | 4,000 | - |
| Foreign dividend | - | 100 | - |
| - | - | 4,100 | - |
| PA due = 3,445 | - | - | - |
| - | £ | - | - |
| Total income | 4,100 | - | - |
| Less PA | 3,445 | - | - |
| - | 655 | - | - |
| Tax thereon (655 at 20%) | - | - | 131.00 |
| - | - | £ | - |
| Total income | - | 4,100 | - |
| Less foreign income | - | 100 | - |
| Reduced total income | - | 4,000 | - |
| Less PA | - | 3,445 | - |
| - | - | 555 | - |
| Tax thereon (555 at 20%) | - | - | 111.00 |
| Tax at marginal rate on foreign dividend | - | - | 20.00 |
| Tax on foreign dividend (100 at 20%) | - | - | 20.00 |
| Less credit allowable | - | - | 15.00 |
| - | - | - | 5.00 |
| Less UK tax deducted by paying agent | - | - | 5.00 |
| No adjustment needed | - | - | NIL |
Example 2 - Where a repayment is due
Tax at the person’s marginal rate on the foreign dividend is less than the credit relief due and the provisional credit allowed by the paying agent.
| - | - | £ |
|---|---|---|
| Gross foreign dividend | - | 100.00 |
| Less foreign withholding tax at 15% | - | 15.00 |
| - | - | 85.00 |
| Less UK tax at 5% (that is lower rate 20% less credit at 15% on 100) | - | 5.00 |
| Amount received by shareholder | - | 80.00 |
| Claimant’s total income consists of | - | - |
| - | £ | - |
| UK untaxed interest | 3,400 | - |
| Foreign dividend | 100 | - |
| - | 3,500 | - |
| PA due = 3,445 | - | - |
| Total income | 3,500 | - |
| Less PA | 3,445 | - |
| - | 55 | - |
| Tax thereon (55 at 20%) | - | 11.00 |
| Total income | 3,500 | - |
| Less foreign income | 100 | - |
| Reduced total income | 3,400 | - |
| Less PA | 3,400 | - |
| - | NIL | - |
| Tax thereon | - | NIL |
| Tax at marginal rate on foreign dividend | - | 11.00 |
| Tax on foreign dividend (at marginal rate) | - | 11.00 |
| Less credit allowable | - | 11.00 |
| - | - | NIL |
| UK tax deducted by paying agent | - | 5.00 |
| Repayment due | - | 5.00 |
| The unrelieved foreign tax of 4.00 (15.00 - 11.00) is not repayable. | - | - |
The unrelieved foreign tax of 4.00 (15.00 - 11.00) is not repayable.
Example 3 - Further tax due
Tax at the person’s marginal rate on the foreign dividend is greater than the credit relief due and the provisional credit allowed by the paying agent.
| - | - | - | £ |
|---|---|---|---|
| Gross foreign dividend | - | - | 100.00 |
| Less foreign withholding tax at 15% | - | - | 15.00 |
| - | - | - | 85.00 |
| Less UK tax at 5% (that is lower rate 20% less credit at 15% on 100) | - | - | 5.00 |
| Amount received by shareholder | - | - | 80.00 |
| Claimant’s total income consists of | - | - | - |
| - | - | £ | - |
| UK trading profits | - | 30,000 | - |
| Foreign dividend | - | 100 | - |
| - | - | 30,100 | - |
| PA due = 5,910 | - | - | - |
| Total income | 30,100 | - | - |
| Less PA | 5,910 | - | - |
| - | 24,190 | - | - |
| Tax thereon | 2,500 at 20% | - | 500.00 |
| Trading profits | 21,200 at 25% | - | 5,300.00 |
| - | 390 at 40% | - | 156.00 |
| Foreign dividend | 100 at 40% | - | 40.00 |
| - | - | - | 5,996.00 |
| Total income | - | 30,100 | - |
| Less foreign income | - | 100 | - |
| Reduced total income | - | 30,000 | - |
| Less PA | - | 5,910 | - |
| - | - | 24,090 | - |
| Tax thereon (2,500 at 20%, 21,200 at 25%, 390 at 40%) | - | - | 5,956.00 |
| Tax at marginal rate on foreign dividend | - | - | 40.00 |
| Tax on foreign dividend (100 at 40%) | - | - | 40.00 |
| Less credit allowable | - | - | 15.00 |
| - | - | - | 25.00 |
| Less UK tax deducted by paying agent | - | - | 5.00 |
| Further tax due | - | - | 20.00 |