Declaring small amounts of taxed foreign dividend income

We have been asked about the handling of small amounts of foreign dividends and the interaction with the short Tax Return or the rules for who has to complete returns. The short Tax Return does not cater for people with foreign income and the amended rules for who has to complete Tax Returns state people with foreign income need to complete Tax Returns.

As we do not wish to see people excluded from benefiting from either of these initiatives just because they have a small amount of taxed foreign dividend income, we have decided on the following course of action to accommodate such customers. This applies to any foreign dividend income that has already had some foreign tax deducted or withheld.

Taxpayers receiving a Short Tax Return

The guidance notes accompanying the short Tax Return tell people that they may use the form if their total taxed foreign dividends received are £300 gross or less per tax year (and there is no other foreign income to report). This income can be declared in Box 5.5 of the short Return. However, there is no room on the short Return to allow sufficient information to be given so that an accurate calculation can be provided. The notes say that any foreign dividend income included on the short Tax Return will receive a tax credit of 10% rather than the amount that is withheld and to contact us if they are not sure of the tax treatment. The taxpayer will be told that if they are liable to tax at the higher rate this may create a small discrepancy in the calculation. If the taxpayer wants a fully accurate calculation they need to complete the main Tax Return, including the foreign supplementary page.

Taxpayers receiving a Tax Review Form (P810)

Similarly a taxpayer receiving a form P810 may question whether they need to complete a Tax Return. They will be told that if the total taxed foreign dividends received are £300 gross or less per tax year and there is no other foreign income to report this may be declared on the form P810. Again if the taxpayer is liable to tax at the higher rate this may create a small discrepancy in the calculation. If the taxpayer wants a fully accurate calculation they need to complete the main Return, including the foreign supplementary page.

Taxpayers filing online using SA Online

Currently SA Online does not support the foreign supplementary page. However, in order not to penalise people who have previously filed using SA Online and who held UK shares that are now foreign owned, a decision has been made to allow similar treatment to the short Tax Return for taxed dividend income from foreign companies as long as it is £300 gross or less per tax year, and there is no other foreign income. This can be entered in the UK dividend section in SA Online. There will be a pop-up window in the application that will give details. As with the short Return and form P810, if the customer is liable to tax at the higher rate, there will be a small discrepancy in the tax calculation. If the customer wants a fully accurate calculation they will need to use 3rd party software that supports the foreign page or use the paper main Return with the foreign supplementary page.

Taxpayers receiving the Main Tax Return and completing on paper

Any foreign income received will need to be included on the foreign income supplementary page.