HMRC guidance has recently been clarified regarding the interaction of Foreign Tax Credit Relief (FTCR) on dividends, and any tax rate specified in a Double Taxation Agreement. The impact of the revised guidance relates specifically to those dividends which qualify for the new Overseas Notional Tax Credit.
The HMRC guidance referred to is provided by Helpsheet 263, which was updated on 8 October. The current version of this Helpsheet can be viewed on their website. (www.hmrc.gov.uk/helpsheets/
The specific change in guidance relates to box TC100 of the FTCR working sheet.
Guidance prior to the update stated;
box TC100
“enter in box TC100 the foreign income (from boxes TC6 to TC10) multiplied by the allowable percentage rate.”
As the figures in boxes TC6 and TC10 already include any calculated Overseas Notional Tax Credit, this guidance would suggest the following behaviour (assuming a foreign dividend of £1,000 and the Double Tax Agreement states that 15% foreign tax is the allowable maximum):
| Gross foreign dividend | £1,000.00 |
| Grossed up for notional credit | £1,111.11 |
| Allowable DTA maximum | £166.67 (£1,111.11 @ 15%) |
The updated guidance states;
box TC100
“enter in box TC100 the foreign income (from column B of the Foreign pages) multiplied by the allowable percentage rate.”
Column B of the foreign page is the value of foreign dividend, prior to the inclusion of any notional tax credit, and therefore clarifies that the correct calculation should be;
| Gross foreign dividend | £1,000.00 |
| Grossed up for notional credit | £1,111.11 |
| Allowable DTA maximum | £150.00 (£1,000.00 @ 15%) |
