Budget Notes


Who is likely to be affected?

1. Individuals claiming the remittance basis of taxation who remit foreign dividend income and who are chargeable to income tax at the higher rate.

General description of the measure

2. The rate at which remittance basis users will be liable to income tax on foreign dividends is being corrected to 40 per cent for those individuals liable at the higher rate. This corrects an error introduced by the Tax Law Rewrite.

Operative date

3. This change will have effect for remittances on and after 6 April 2008.

Current law and proposed revisions

4. Currently, remittance basis users who are higher rate taxpayers are liable at 32.5 per cent on foreign dividend income remitted to the UK.

5. The Income Tax (Trading and Other Income) Act 2005 mistakenly changed the rate at which foreign dividend income is charged to tax on these remittance basis users from 40 per cent to 32.5 per cent. Tax Law Rewrite Bills are not intended to amend the substance of tax legislation.

6. Legislation will be amended to correct the position so that remittance basis users liable at the higher rate will be taxed at 40 per cent on foreign dividend income remitted to the UK.

Further advice

7. If you have any questions about this change, please email offshorepersonal.taxteam@hmrc.gsi.gov.uk or telephone 020 7147 2762. Information about Budget measures is available on the HM Revenue & Customs website at www.hmrc.gov.uk