INTM164520 - UK residents with foreign income or gains: dividends
Paying agents
Payments up to 5th April 2001
Where dividends or interest, other than foreign bank deposit
interest, from abroad were paid through a paying agent in the
United Kingdom (ICTA88/S118B) or collected, etc. by a banker etc.
in the United Kingdom (ICTA88/S118C) the paying agent or banker
etc. was generally required to deduct United Kingdom Income Tax.
Paying agents, bankers etc. were authorised to allow credit
automatically for withholding tax on dividends and interest. Full
details of this arrangement are in the Guidance Notes for
collecting agents (para. 10.5 onwards) and the Guidance Notes for
paying agents (para. 9.8 onwards).
In addition paying agents entrusted with the payment of
dividends or interest from abroad could be authorised by the Centre
for Non-Residents, Nottingham to allow provisional relief for
foreign withholding taxes not included in the Circular.
An agent who gave provisional relief was required to show on
the dividend voucher the gross amount of the dividend and how the
amounts of tax had been computed. The certificate of deduction of
tax will show where credit for foreign tax is allowed, for
example
| £ | |
| Gross amount of dividend | 100.00 |
| Less foreign tax deducted at 15% | 15.00 |
| 85.00 | |
| Less UK tax at 5% on 100 | 5.00 |
| Net amount of payment | 80.00 |
Payments from April 2001
The Paying and Collecting Agents schemes were abolished from
April 2001. UK paying and collecting agents (mainly banks and
stockbrokers) are no longer required to deduct income tax when
paying or collecting interest on quoted UK Eurobonds or foreign
dividends and interest. The arrangements under which paying agents
previously deducted tax from payments of UK public revenue
dividends were replaced by new arrangements provided for in clause
111 of Finance Act 2000.
In future all interest on quoted Eurobonds will be paid
gross. The definition of quoted Eurobond was also updated to ensure
that bonds will no longer have to be issued in bearer form in order
to fall within the definition and be free of withholding tax.
