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HMRC internal manual

Savings and Investment Manual

Dividends and other company distributions: qualifying distributions: persons not entitled to tax credits

Qualifying distributions received by persons not entitled to tax credits

ITTOIA05/S399 deals with the tax treatment of qualifying distributions received by persons not entitled to a tax credit (for example, because they are non-resident and do not fall within the definition of ‘eligible non-UK resident’). Note, however, that a tax credit with a nil value (SAIM5100) is still a tax credit, and section 399 does not apply to it.

The non-UK resident is treated as having paid income tax at the dividend ordinary rate (SAIM1080) on the amount or value of the distribution. This does not apply in stock lending and repo arrangements.

The amount or value of the distribution is the ‘grossed up’ amount of the distribution (unless the recipient is a non-UK resident company beneficially entitled to the income). See SAIM1090 for an explanation of ‘grossing up’.

ITA07/S1025 excludes ‘non-qualifying income’ in the calculation of a person’s ‘modified net income’. ITA07/S1026 defines ‘non-qualifying income’ and includes at S1026(a) distributions from UK resident companies on which there is no tax credit - see SAIM9060).

ITTOIA05/S399 does not apply to a UK resident who is a party to certain stock lending or repo arrangements (ITA07/S592 to S594).