Am I paying tax?

rizla01

When Bristol & West floated some years back I received some preference shares on which I receive regular payments of £10.13.
Along with this payment I get a 'tax credit' form showing tax paid of just over £1.

I am retired now and with not enough income to need me to pay tax so I have asked B&W (Bank of Ireland) to contact the registrars on my behalf (They seemed vary reluctant to discuss with me) to tell me where to send the 'application for interest without tax' form since B&W were no longer trading 'and no-one seemed to be able to advise' and I was getting to the end of my wits trying to battle an insurmountable brick wall - all for a quid!!

Any way, turns out that I can't (don't need to ) do anything about it and not to worry as I am not actually paying anything after all.
Here is copy of the eMail sent to me.

Dear Mr Rizla01,

Further to our call last Thursday I contacted our Registrar, Capita, regarding your query and they have advised that UK dividends are paid without the deduction of tax. Prior to the abolition of Advance Corporation Tax (c2000) shareholders that were not liable to Income Tax could apply to receive the dividend payment gross but since then the Tax Credit has become a purely notional figure that higher rate tax payers can use to offset their total tax bill.

Essentially, the tax credit provided on your dividend tax voucher accounts for the fact that the Company is already paying tax on the profits used for distribution of the dividend payment. The tax credit is available to the shareholder to offset against any Income Tax that may be due on their dividend income.

There is a section on the UK revenue website which provides further information on how UK dividends are paid and under what circumstances an individual can claim the tax credit:

http://www.hmrc.gov.uk/taxon/uk.htm#1

I hope this information is of assistance to you.

Kind regards,
Dearbhla Kelly
Group Secretary’s Office
Bank of Ireland Group

My head nearly exploded on reading that.
Why couldn't someone have told me that a long time ago.

Does this mean that I will always have to receive notification of my tax credit which as far as I know is of no use to me and just a waste of earths resources.

Can someone explain to me what that eMail actually says and that it is correct, please?

The way my simple mind interprets what i read is that I cannot get the £1 tax credit paid with my dividend but it would, should I choose, enable me to reduce my tax liability by £1. Is that it?

So if and when I move, buy a Btl and start paying HMRC I can use it then.

Can it be backdated (is it worth hanging on to all these 'Tax Credit forms)?

Linton

Taxing of dividends is perverse. There is a theoretical standard rate tax of 10% but it is not charged as the dividend is paid by the company after corporation tax has been deducted and this corporation tax is assumed to match the 10% theoretical income tax - the 10% figure seems pretty arbitrary as it bears no relation to the corporation tax actually paid.

You therefore get a 10% tax credit which cancels out the income tax. So the tax credit basically covers tax you never paid in the first place and so it does not seem reasonable to me that you should get a refund for it. This is the basis of Gordon Brown's alleged raid on pensions.

The tax credit note's sole purpose is for your tax records.

CLAPTON

rizla01 wrote: »

When Bristol & West floated some years back I received some preference shares on which I receive regular payments of £10.13.
Along with this payment I get a 'tax credit' form showing tax paid of just over £1.

I am retired now and with not enough income to need me to pay tax so I have asked B&W (Bank of Ireland) to contact the registrars on my behalf (They seemed vary reluctant to discuss with me) to tell me where to send the 'application for interest without tax' form since B&W were no longer trading 'and no-one seemed to be able to advise' and I was getting to the end of my wits trying to battle an insurmountable brick wall - all for a quid!!

Any way, turns out that I can't (don't need to ) do anything about it and not to worry as I am not actually paying anything after all.
Here is copy of the eMail sent to me.



My head nearly exploded on reading that.
Why couldn't someone have told me that a long time ago.

Does this mean that I will always have to receive notification of my tax credit which as far as I know is of no use to me and just a waste of earths resources.

Can someone explain to me what that eMail actually says and that it is correct, please?

The way my simple mind interprets what i read is that I cannot get the £1 tax credit paid with my dividend but it would, should I choose, enable me to reduce my tax liability by £1. Is that it?

So if and when I move, buy a Btl and start paying HMRC I can use it then.

Can it be backdated (is it worth hanging on to all these 'Tax Credit forms)?

for a person that doesn't pay tax or only pays at standard rate of 20% then the dividend tax credit is useless.


if you were a higher rate tax payer then it reduces the 35% tax on dividends to 25%