Tax return and Spanish withholding tax 28 January at 2:13PM in Cutting tax 10 replies 147 views

teapot2

I've been self employed for years so used to completing a tax return.  However am a bit stumped,  I've inherited a few shares in a Spanish owned power company.  I've received just over £47 from the shares and a total of just over £11 in 'Spanish Withholding Tax'.  I assume I'm doing something wrong because if I input these two figures into the relevant section of the tax return [not foreign income], I get an error message.  I've tried g00gle but couldn't find understandable info that applied.  Some was from a number of years ago and I'm not sure if things changed after Brexit.

Can anyone help please?

purdyoaten2

It’s foreign income. You enter it in the foreign dividend section . See question 6 on page 3 of the attached paper version of the online form. 

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1062331/SA100_tax_return__2022_.pdf

Jeremy535897

The amount will be within your dividend allowance, assuming that your total dividends are £2,000 or less (UK and overseas) so the Spanish withholding tax is just a cost, although under the UK Spain double tax agreement, they should only be deducting 10% withholding tax. You could complete the appropriate form to send to Spain, but for about £6 I doubt it's worth it.

teapot2

purdyoaten2 said:

It’s foreign income. You enter it in the foreign dividend section . See question 6 on page 3 of the attached paper version of the online form. 

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1062331/SA100_tax_return__2022_.pdf

Thanks for your reply, the section you point out is the one I've used so I don't understand why I am getting an error message 😕

purdyoaten2

What’s the error message?

Jeremy535897

The notes say

"Box 6: Foreign dividends (up to £2,000)

If your only foreign income was any interest in box 3 and dividends up to £2,000 and you’re claiming deduction relief, put the net amount of foreign dividends (in UK pounds) in box 6.

Put the foreign tax taken off in box 7.

If your total dividend income (including UK and foreign dividends) is over £2,000 and you’re eligible to claim deduction relief or Foreign Tax Credit Relief, do not include the foreign dividend in this box. Complete the Foreign pages instead.

It is not possible to use a mix of both tax credit relief and deduction relief on the same income source."

I am a bit baffled by this. If your foreign dividends and UK dividends are under £2,000, there is no UK tax, and so no credit for foreign tax. If you are getting below the £2,000 by deducting the foreign tax, OK, but why then do you need to state the foreign tax figure in box 7? Perhaps it is just too late at night...

purdyoaten2

Jeremy535897 said:

The notes say

"Box 6: Foreign dividends (up to £2,000)

If your only foreign income was any interest in box 3 and dividends up to £2,000 and you’re claiming deduction relief, put the net amount of foreign dividends (in UK pounds) in box 6.

Put the foreign tax taken off in box 7.

If your total dividend income (including UK and foreign dividends) is over £2,000 and you’re eligible to claim deduction relief or Foreign Tax Credit Relief, do not include the foreign dividend in this box. Complete the Foreign pages instead.

It is not possible to use a mix of both tax credit relief and deduction relief on the same income source."

I am a bit baffled by this. If your foreign dividends and UK dividends are under £2,000, there is no UK tax, and so no credit for foreign tax. If you are getting below the £2,000 by deducting the foreign tax, OK, but why then do you need to state the foreign tax figure in box 7? Perhaps it is just too late at night...

It’s even more confusing in the tax return notes where it states: 

Before you start

You may need the following documents to help you fill in the tax return:

• received income from abroad (unless it was less than £2,000 of foreign dividends)

But, relevant to that box, it states later:

Box 6: Foreign dividends (up to £2,000)

If your only foreign income was any interest in box 3 and dividends up to £2,000 and you’re claiming deduction relief, put the net amount of foreign dividends (in UK pounds) in box 6.

Put the foreign tax taken off in box 7.

If your total dividend income (including UK and foreign dividends) is over £2,000 and you’re eligible to claim deduction relief or Foreign Tax Credit Relief, do not include the foreign dividend in this box. Complete the Foreign pages instead.

teapot2

@purdeyoaten2 the error message is in red and reads 'WARNING: PLEASE CHECK AND AMEND THE ENTRY BELOW' I don't have any other foreign income to declare, I have other UK dividends on that page of the return but in total they are all just over £400

Jeremy535897

Try taking out the foreign tax figure out of box 7. It doesn't affect your liability in any way.

teapot2

Jeremy535897 said:

Try taking out the foreign tax figure out of box 7. It doesn't affect your liability in any way.

Thanks, I tried that this morning and just left the dividend amount in but the error message is still there when I do - stumped

Jeremy535897

Leave the foreign dividend out, rather than file late, as it has no impact on your tax liability.