INTM164490 - UK residents with foreign income or gains: dividends: Determination of rates of foreign underlying tax - Foreign Income - standard cases - example
CTIAA Underlying Tax Group, Yorke House, Nottingham normally only computes a rate of underlying tax (see INTM164010 paragraph (d)) and does not usually require evidence of or comment on the direct tax (see INTM164010 paragraph (c)) charged on a dividend. Exceptionally they will compute an inclusive rate (see INTM164500).
In a standard case where the rate relates only to underlying tax, then the starting point of the calculation of the foreign income is the gross dividend before deduction of any foreign direct tax.
Example
| - | - | £ |
|---|---|---|
| Gross dividend | - | 200,000 |
| Direct tax (5%) | - | 10,000 |
| Underlying rate (as notified by UTG) | - | 24% |
| Foreign Income computation | - | - |
| - | £ | - |
| Gross dividend | 200,000 | - |
| Gross at 24% (200,000/0.76 x 0.24) | 63,157 | - |
| Foreign income | 263,157 | - |
| - | - | £ |
| Corporation Tax at 30% | - | 78,947 |
| Less Tax credit relief | - | - |
| Underlying tax | 63,157 | - |
| Direct tax | 10,000 | - |
| - | - | 73,157 |
| Net Corporation Tax payable | - | 5,790 |
The starting point in the Foreign Income computation must be the net dividend in some other cases: see INTM164500 onwards.