Foreign Dividend Tax For Self Assessment

[jaizan]

I have a query about the self assessment taxation of overseas dividends.

I get dividends on a German company, on which they charge withholding tax at 26.38%

According to my understanding, I'm allowed a maximum foreign tax credit relief, so I enter 15%.

Every time I do the tax calc, it shows 0% relief, not 15%. As below.

Is this experience normal for other users ?
Do you then manually enter the 15% figure and has this been accepted in the past ?

I don't entirely understand the purpose of entering the percentage if it always calculates based on 0% relief.

PLEASE NOTE ANY ADVICE TO USE A TAX ADVISOR WILL NOT BE HELPFUL AS 15% OF THE DIVIDEND IS LESS THAN AN ADVISOR WOULD CHARGE.
SO I HAVE NO INTENTION OF USING A TAX ADVISOR.

[Gengulphus]

...
Every time I do the tax calc, it shows 0% relief, not 15%. As below.
...

That doesn't say 0% relief - it says £0.00 relief. I.e. an actual monetary amount, not a percentage rate.

That suggests to me that your problem may not lie in the tax calculation, but in the data you've entered in the Foreign section of the tax return. Looking at the paper version of that section, it seems to require Foreign Tax Credit Relief to be claimed on a per-dividend basis, by putting X in the appropriate box in column E on page F3. I don't know how the online version does it (I've carefully avoided the complications of foreign tax for many years now, precisely because I don't to have to deal with this sort of issue myself!) but it usually matches up fairly exactly with the paper version (e.g. your image seems to be a good match to what box 2 on page F1 does, so a failure to say that you want to claim Foreign Tax Credit Relief when entering that dividend strikes me as the simplest explanation for their calculation saying £0.00 foreign tax relief.

Or another possibility that strikes me in the light of what you say about the amount being to small to justify using a tax adviser is that if your total foreign dividends are under £300, you might be using the online equivalent of boxes 6 and 7 on page TR3 of the main tax return. Those don't seem to have any option for claiming Foreign Tax Credit Relief, so I suspect that they may well be processed on the assumption that you aren't claiming it. If so, I suspect the only way to claim it might well be not to use that shortcut for under-£300 foreign dividend income and fill in the full Foreign section...

Not saying that any of that is definitely the explanation, though - just that it's the first thing I would check out to try to understand what's going on.

Gengulphus

[PinkDalek]

... Every time I do the tax calc, it shows 0% relief, not 15%. ...

Noting the reply from Gengulphus, including his That doesn't say 0% relief - it says £0.00 relief. I.e. an actual monetary amount, not a percentage rate., another aspect to consider is that Foreign Tax Credit Relief is restricted to the amount of UK Income Tax that has been charged on that foreign dividend income.

Can you see the tax calculation itself to see if anything has been charged?

If nothing it may even benefit you to 'expense' the 15% due to any possible interaction with other reliefs and allowances. In other words, you do not place a cross (or online equivalent) in the E To claim Foreign Tax Credit Relief, put ‘X’ in the box and do the part I've underlined under F F Taxable amount – if you’re claiming
Foreign Tax Credit Relief, copy column B here. If not, enter column B minus column C from https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/876153/SA106_English_Form_2020.pdf.

If something have you tried to play around with the part that says 'To change the order of income used to calculate ... please click 'Back'?

[jaizan]

Noting the reply from Gengulphus, including his That doesn't say 0% relief - it says £0.00 relief. I.e. an actual monetary amount, not a percentage rate., another aspect to consider is that Foreign Tax Credit Relief is restricted to the amount of UK Income Tax that has been charged on that foreign dividend income.

Ah... I thought income tax was all fungible, so if I pay income tax on one source of income, relief from another source of income could be offset against that.

Incidentally, I've ticked the box to claim tax relief with the online form & saved it properly (below).
However, at the end when it offers me the opportunity to print out the equivalent full "paper" return, it says:
E. To claim foreign tax credit relief put 'X' in the box Not Entered

[PinkDalek]

Or another possibility that strikes me in the light of what you say about the amount being to small to justify using a tax adviser is that if your total foreign dividends are under £300, you might be using the online equivalent of boxes 6 and 7 on page TR3 of the main tax return. Those don't seem to have any option for claiming Foreign Tax Credit Relief, so I suspect that they may well be processed on the assumption that you aren't claiming it. If so, I suspect the only way to claim it might well be not to use that shortcut for under-£300 foreign dividend income and fill in the full Foreign section...

I've never used the < £300 option but although they don't specifically have any option for claiming Foreign Tax Credit Relief, they do have a box 7 Tax taken off foreign dividends – the sterling equivalent so they may grant FTCR automatically (if not unavailable for the reason I attempted to explain in my earlier reply).

[scrumpyjack]

This HMRC page explains it
https://www.gov.uk/government/publicati ... -paid-2019

As I understand it you the amount of tax relief cannot be more than the UK tax liability on that particular source of income and also varies depending on the double tax treaty with the relevant country.

If you are a basic rate taxpayer and your dividend income does not attract further tax, you would not get relief. As I recall dividends are taxed at 0%, 7.5%, 32.5% and 38.1% depending on income

[PinkDalek]

Noting the reply from Gengulphus, including his That doesn't say 0% relief - it says £0.00 relief. I.e. an actual monetary amount, not a percentage rate., another aspect to consider is that Foreign Tax Credit Relief is restricted to the amount of UK Income Tax that has been charged on that foreign dividend income.

Ah... I thought income tax was all fungible, so if I pay income tax on one source of income, relief from another source of income could be offset against that.

My wording was along the correct lines but to be clear see https://www.gov.uk/government/publications/calculating-foreign-tax-credit-relief-on-income-hs263-self-assessment-helpsheet/hs263-relief-for-foreign-tax-paid-2019#relief-by-way-of-credit-for-foreign-tax-paid

However, at the end when it offers me the opportunity to print out the equivalent full "paper" return, it says:
E. To claim foreign tax credit relief put 'X' in the box Not Entered

Sorry I can't help there, although I complete the SA106 annually, I'm one of the few who still submits paper returns.

[Gengulphus]

Or another possibility that strikes me in the light of what you say about the amount being to small to justify using a tax adviser is that if your total foreign dividends are under £300, you might be using the online equivalent of boxes 6 and 7 on page TR3 of the main tax return. Those don't seem to have any option for claiming Foreign Tax Credit Relief, so I suspect that they may well be processed on the assumption that you aren't claiming it. If so, I suspect the only way to claim it might well be not to use that shortcut for under-£300 foreign dividend income and fill in the full Foreign section...

I've never used the < £300 option but although they don't specifically have any option for claiming Foreign Tax Credit Relief, they do have a box 7 Tax taken off foreign dividends – the sterling equivalent so they may grant FTCR automatically (if not unavailable for the reason I attempted to explain in my earlier reply).

You could be right, but HMRC's notes on the Foreign section of the paper tax return put a number of conditions on claiming Foreign Tax Credit Relief and make it clear that it's something the taxpayer claims (starting in the middle of the first column on page FN2). So I'd expect the general rule to apply that not claiming something you're entitled to is perfectly OK, but claiming something you're not entitled to is not. That would imply that it would be safer for the online system to assume that Foreign Tax Credit Relief is not claimed than to assume it is claimed... That IMHO favours the assumption that the online system treats Foreign Tax Credit Relief is not claimed - but only favours it rather than being conclusive because the foreign-dividends-under-£300 option is clearly designed to streamline tax reporting and calculation for small amounts of foreign dividend income, and HMRC might reckon that they can accept some de minimis deviations from the strictly correct calculation in the interests of that streamlining.

Gengulphus