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Foreign Dividends and Interest – SA100 or SA106

written by Digita Support, 8 March 2016

by Simon Doughty, Tax Support Specialist.

It has been possible to report foreign dividends of under £300 and gross foreign interest of under £2,000 on the SA100 since 2008/09 when the online filing of SA100 became mandatory. However, on support, we still receive a lot of queries on this topic.

Those of you in practice long enough will probably remember the various windfalls from Building Societies in the late 80’s / early 90’s. Abbey National being one of the main ones where, through various reorganisations, individuals now receive foreign dividends from Santander.

There is no facility to complete SA106 foreign pages using HMRC’s own software.

With the online filing of the SA100 being mandatory after 31 October, without the caveat to report foreign dividends of under £300 on the SA100, HMRC would effectively be preventing large numbers of tax payers from filing their return online.

Is there a difference in the tax treatment between the SA100 and SA106 for the purpose of reporting the liability – yes!

If the dividend is reported on the SA100, the foreign tax credit ( box 6 ) is not processed when the return is captured. HMRC will gross up the dividend ( box 5)  by 100/90 and then apply the 10% overseas notional tax credit ( ONTC ).

This is fine if your client is a basic rate tax payer.

However, if your client is either :-

  • Higher Rate tax payer
  • Additional Rate tax payer
  • Basic rate tax payer born before 6/4/1938 and their income straddles the age – related allowance threshold ( 2015/16 =   £27,700 to £27,820 )

They will be entitled to the ONTC and also some/all foreign tax credit relief depending upon the allowable double taxation agreement with the necessary country.

Example

In 2015/16, John receives a salary of £50,000 and foreign dividend from Santander for £300, carrying an 18% foreign tax credit of £54. (DTA on Spanish dividends is £15%)

SA100 SA106
Dividend £300.00 £300.00
Grossed up 100/90 for ONTC £333.33 £333.33
Taxable at 32.5% £108.33 £108.33
Less 10% ONTC -£ 33.33 -£ 33.33
Less Spanish Tax (Restricted to 15%) N/A -£45.00
Tax liability on dividend £75.00 £30.00

Hopefully this proves useful when deciding whether to report your client’s foreign dividends on the SA100 or SA106.


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