INTM601240 - Transfer of assets abroad: The income charge: Measure of income - dividends

Income tax is charged on dividends and other distributions from UK companies under ITTOIA05/S383. If the income of the person abroad is dividend income, it is unlikely that the person abroad will be entitled to a tax credit on the dividend, and the amount included in the accounts is likely to be the net dividend. Where the income charge applies to this see INTM602520.

Before 6 April 2016, to arrive at the amount of UK source dividends to be taken into account in the amount of the income charge, the net dividend should be grossed up by reference to the tax credit and the gross dividend taken into account. Such income is treated as arising to the individual and, being resident in the UK, they would be entitled to the tax credit.

From 6 April 2016, a tax-free dividend allowance was introduced for UK residents in respect of dividend income, replacing the dividend tax credit. Therefore, grossing up no longer applies.