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  • FIRST POST
    • RoyBrock7898
    • By RoyBrock7898 9th May 17, 6:10 PM
    • 40Posts
    • 8Thanks
    RoyBrock7898
    Dividend Income paid Net
    • #1
    • 9th May 17, 6:10 PM
    Dividend Income paid Net 9th May 17 at 6:10 PM
    I don't pay income tax. Suddenly my broker has started to pay my dividends net of tax at 20%. All last year and the first dividend this year were paid gross. The second dividend was paid net.

    They said I can reclaim at the end of the year but of course this gives the tax man a free load and denies me the chance to re-invest 20% of my dividends.

    Do I have to accept this or can I still get dividends paid gross?
Page 1
    • Linton
    • By Linton 9th May 17, 6:32 PM
    • 8,615 Posts
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    Linton
    • #2
    • 9th May 17, 6:32 PM
    • #2
    • 9th May 17, 6:32 PM
    What investment generates these dividends? The reason I ask is that the only cause of a change to net payments I can think of is that they were treated as dividends in the past but are now classed as interest. Funds that invest in both bonds and equity may change the classification of the income (or have it changed for them). In that case it could be the fund which is charging tax, not the broker.

    Although banks can pay interest gross, other people cant. They must continue to deduct basic rate tax.

    Of course this may not explain your situation, but in the absence of further information it's a bit difficult.
    • RoyBrock7898
    • By RoyBrock7898 9th May 17, 7:06 PM
    • 40 Posts
    • 8 Thanks
    RoyBrock7898
    • #3
    • 9th May 17, 7:06 PM
    • #3
    • 9th May 17, 7:06 PM
    Thank you, the two shares so far this year are HSBC and GSK paid gross and British Land paid net. British Land is a new purchase this year.
    • Linton
    • By Linton 9th May 17, 7:12 PM
    • 8,615 Posts
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    Linton
    • #4
    • 9th May 17, 7:12 PM
    • #4
    • 9th May 17, 7:12 PM
    Thank you, the two shares so far this year are HSBC and GSK paid gross and British Land paid net. British Land is a new purchase this year.
    Originally posted by RoyBrock7898
    Ah, British Land shares - I will leave you to study this and then explain it to the rest of us!
    • RoyBrock7898
    • By RoyBrock7898 9th May 17, 7:29 PM
    • 40 Posts
    • 8 Thanks
    RoyBrock7898
    • #5
    • 9th May 17, 7:29 PM
    • #5
    • 9th May 17, 7:29 PM
    Thank you. I shall print that, wrap it round a club, and chastise the broker that didn't give me such a concise answer. And simply?

    Dividend comprise about 90% rental income and 10% from other sources.

    They tax property rental at source and pay the tax at 20% to HMRC. The company decided the proportions of rental income and non-rental income that will be paid for each dividend.

    Simples, any way, club now delivered to the customer services executive.

    Thanks again
    • EdGasketTheSecond
    • By EdGasketTheSecond 9th May 17, 7:39 PM
    • 323 Posts
    • 182 Thanks
    EdGasketTheSecond
    • #6
    • 9th May 17, 7:39 PM
    • #6
    • 9th May 17, 7:39 PM
    If you hold BLND in a SIPP or ISA you will get dividends paid gross. Outside, assuming that the entire dividend is a Property Income Distribution (PID), you will get taxed on it at 20%. Sometimes dividends are declared as ordinary dividend and sometimes part ordinary and part PID or just all PID; you pay 20% tax on the PID part.
    • bowlhead99
    • By bowlhead99 9th May 17, 7:52 PM
    • 6,987 Posts
    • 12,581 Thanks
    bowlhead99
    • #7
    • 9th May 17, 7:52 PM
    • #7
    • 9th May 17, 7:52 PM
    Without seeing what Linton's link has to say, I expect the nuance is that some of the money British Land are paying you is not a "dividend" (a distribution of the net profits of an operating business after the company has paid tax).

    Many funds and investment companies pay dividends like that and they do not have to withhold tax from you when they do it, they simply pay you whatever amount per share they declared they're going to pay.

    However, British Land is structured as a Real Estate Investment Trust under UK tax regulations. One of the features is that it doesn't have to pay tax on the net property income it earns from its investments (rental income and so on). That's very efficient for investors such as tax exempt pension funds or individuals holding shares in the REIT via an ISA or SIPP, because they can make a distribution of property income to those investors and they won't pay tax on it because they're not taxpayers.

    However for individuals who aren't investing through an ISA or SIPP, the taxman makes them withhold basic rate tax at source when they pay over the property income to you. You pay tax on the income just like you would if you had owned the office block or warehouse or care home or shopping centre yourself and received income from tenants. So if your normal income tax rate is 40% or more you'll owe more tax than has been deducted at source and if you are normally a nil rate taxpayer you can claim it back from HMRC and if you're a 20% taxpayer it's already the right amount.

    The thing to recognise is that these distributions are streams of untaxed property income coming out of the investments as PID (property income distributions). The REIT didn't pay any tax on those profits, they are your profits, so they are required to withhold tax from you if you're getting your hands on them and are not investing through an ISA or SIPP.

    Whereas a corporate dividend like you get from HSBC or GSK is a payment of income which was left over after the company has already paid its corporation tax bill at whatever necessary rate, and the government helps you out by giving you a special annual allowance and then a reduced tax rate to receive that dividend income.

    Not every distribution made by British Land or other REITs will always be PID. Sometimes it will be, but other times it will just be general corporate profits and sent to you as a dividend. So you have to check out the statements/ vouchers or read the reports or announcements to find out what dividends you got (gross) versus what PID you got (net of 20% withholding tax).

    Your record-keeping headaches and tax returns are avoided by holding your REITs or PAIFs through an ISA or SIPP where no tax is due on dividends or PIDs.

    *Edit: I see that this was already answered while I was writing the above on the Tube home! Good to see I guessed right
    Last edited by bowlhead99; 09-05-2017 at 7:56 PM. Reason: .
    • Economic
    • By Economic 9th May 17, 7:59 PM
    • 149 Posts
    • 98 Thanks
    Economic
    • #8
    • 9th May 17, 7:59 PM
    • #8
    • 9th May 17, 7:59 PM
    If you hold BLND in a SIPP or ISA you will get dividends paid gross. Outside, assuming that the entire dividend is a Property Income Distribution (PID), you will get taxed on it at 20%. Sometimes dividends are declared as ordinary dividend and sometimes part ordinary and part PID or just all PID; you pay 20% tax on the PID part.
    Originally posted by EdGasketTheSecond
    The dividends that I get from British Land in my TD Direct ISA are paid net and then after several weeks I receive a tax credit to my ISA.
    • greenglide
    • By greenglide 9th May 17, 10:31 PM
    • 2,919 Posts
    • 1,893 Thanks
    greenglide
    • #9
    • 9th May 17, 10:31 PM
    • #9
    • 9th May 17, 10:31 PM
    So what is the situation with "normal" Investment Trusts which invest in property such as SLI.

    Do they suffer a penalty for not being a REIT?
    • xylophone
    • By xylophone 10th May 17, 1:01 AM
    • 23,634 Posts
    • 13,768 Thanks
    xylophone
    The dividends that I get from British Land in my TD Direct ISA are paid net and then after several weeks I receive a tax credit to my ISA.
    Similarly with my shares in Redefine and Target in my II ISA.
    • Economic
    • By Economic 10th May 17, 8:15 AM
    • 149 Posts
    • 98 Thanks
    Economic
    So what is the situation with "normal" Investment Trusts which invest in property such as SLI.

    Do they suffer a penalty for not being a REIT?
    Originally posted by greenglide
    Is it not a REIT?
    • bowlhead99
    • By bowlhead99 10th May 17, 1:02 PM
    • 6,987 Posts
    • 12,581 Thanks
    bowlhead99
    So what is the situation with "normal" Investment Trusts which invest in property such as SLI.

    Do they suffer a penalty for not being a REIT?
    Originally posted by greenglide
    Is it not a REIT?
    Originally posted by Economic
    It is a Guernsey-domiciled investment company treated by the UK as a REIT. See their factsheet, top right. http://uk.standardlifeinvestments.com/IT_Property_Income.pdf

    Since the regulations were introduced allowing property invest companies to convert to REITs, more than three quarters of them that could, have. As it is a tax efficient structure, most want to be REITs and if not usually have a decent reason. Some investment trusts or listed investment companies are just "normal" ITs or companies as you say, and if holding some individual properties or property-related businesses is not the key theme of their strategy, they won't seek the special status.

    SL do have a variety of other property fund entities eg their UK Real Estate PAIF (which is an open ended fund, not a REIT, but has similar tax benefits as it's allowed to stream the income into PIDs) and they also have another couple of open ended funds that invest globally into other REITs but are not themselves a REIT, etc.
    Last edited by bowlhead99; 10-05-2017 at 1:13 PM.
    • greenglide
    • By greenglide 10th May 17, 4:24 PM
    • 2,919 Posts
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    greenglide
    It is a Guernsey-domiciled investment company treated by the UK as a REIT.
    and we hold it in an ISA and so receive the dividends gross.

    I also hold FCPT some of which is in an ISA and some is not - yet. The tax treatment of the dividends appears the same in each holding (they are held on different platforms). FCPT appears, from the factsheet, to be an IT. There appears to be a relationship with F&C REIT Property Asset Management and other companies. Does the property income get converted into "normal" income in some way?
    • RoyBrock7898
    • By RoyBrock7898 15th May 17, 6:14 PM
    • 40 Posts
    • 8 Thanks
    RoyBrock7898
    We don't use ISAs yet as there is no cost benefit.

    Now I have had another short dividend payment.

    Lloyds with one dividend paying 1p/share returns a total of 0.5p/share. The other dividend paying 2p/share returns the full amount. What gives here?

    This is another new investment this year. Do many shares attract odd treatments as well?
    • eskbanker
    • By eskbanker 15th May 17, 6:22 PM
    • 5,889 Posts
    • 5,848 Thanks
    eskbanker
    Lloyds with one dividend paying 1p/share returns a total of 0.5p/share. The other dividend paying 2p/share returns the full amount. What gives here?
    Originally posted by RoyBrock7898
    According to http://www.lloydsbankinggroup.com/Investors/shareholder-info/dividends/ there's both a 0.5p special dividend and a 1.7p final one paying tomorrow (the first ones since last September), are these the Lloyds shares you're referring to? Some sort of rounding issue perhaps?
    • RoyBrock7898
    • By RoyBrock7898 15th May 17, 9:06 PM
    • 40 Posts
    • 8 Thanks
    RoyBrock7898
    esk, indeed Lloyds shares. Rounding makes sense, although the dividend was indeed declared as 1p and 2p and my broker has obviously used the same figures. 0.5 and 1.7 makes complete sense.

    What a nonsense of reportage.

    Thank you.
    • RobertJN
    • By RobertJN 9th Oct 17, 12:34 PM
    • 1 Posts
    • 0 Thanks
    RobertJN
    Property Income Distribution
    Thankyou for the useful information about the taxation of dividends from an investment trust which invests in property companies.
    I have paid 20% tax at source on such an investment, (and also have some normal gross dividend income from other investments with the the same Investment Trust.)

    Now I cant work out where to put the income, and the tax, from the property fund on my Self Assessment tax form! it doesn't seem to fit with the dividends section or in the property pages. I've sent my question to HMRC but have received no answer.......
    Can anyone help?
    thanks!
    R
    • xylophone
    • By xylophone 9th Oct 17, 2:42 PM
    • 23,634 Posts
    • 13,768 Thanks
    xylophone
    http://www.britishland.com/investors/dividends/reits-dividends-and-uk-tax

    http://forums.moneysavingexpert.com/showthread.php?t=5699954&highlight=reit+tax
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