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bigduckontax, Accountant
Category: Tax
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Hi. I have the following question: Background: I am the

Customer Question

Hi. I have the following question:

Background: I am the director and 100% shareholder of a UK based limited company. I am also a south african citizen permanently based in south africa. All relevant taxes for the company have been paid to HMRC.

Question: As a south african citizen with 100% can i withdraw dividends from the company without having to pay UK tax?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.

You should receive this income free of tax. Claims should be made to the receiving office. For starters I would suggest writing to HMRC, Bradford, BD96 1YY, UK.
Customer: replied 2 years ago.

Hi Keith.


 


Thank you for the reply. Is that a definitive "yes"? Unfortunately I need to get back to my UK accountant asap on this. As you can imagine writing to HMRC could take weeks for a reply.


 


Also what do you mean by claims should be made to the receiving office?


 


Looking forward to your reply.

Expert:  bigduckontax replied 2 years ago.
HMRC advice sheet on the subject make it quite plain that you are not liable to UK tax on your dividends. It also makes it clear that the tax deducted can be reclaimed.

As for as the receiving office is concerned I am only passing on the HMRC gobbledegook published on this matter. I am as much in the dark as you are! Needless to say I have researched the meaning without any solution. As the withheld tax would pass through the Bradford office it seems sensible to start there. An alternative would be the company's tax office or even your own UK tax office if you even have one.

Can your accountant not tell the company that as a non-resident they should not be with holding the tax from the dividends at all? That might provide a solution
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3356
Experience: FCCA FCMA CGMA ACIS
bigduckontax and other Tax Specialists are ready to help you
Customer: replied 2 years ago.

Hi Keith,


 


I believe that answers my question thank you.


 


FYI. I am the sole director (owner) of the limited company. My UK based accountant actually requested this information from me as they are not tax consultants and just want confirmation from myself.


 


Thank you.

Expert:  bigduckontax replied 2 years ago.
Pleased to be of assistance. I find that sort of HMRC information positively infuriating. It smacks of an attitude that HMRC would really rather prefer you not to bother with a reclaim.

Please be so kind as to rate me before you leave the site.
Expert:  bigduckontax replied 2 years ago.
Thank you for your support.
Expert:  Sam replied 2 years ago.

Hi

 

 

My name is XXXXX XXXXX and I am afraid dividend tax is never refundable, as its a notional tax that deducted - (means that is not actually tax that has been paid to HMRC)

Although this amount can used as a tax credit when other income is received and tax has been suffered - , it will never create a tax refund (even for non residency, or non use of full personal tax allowances or if taxed is owed on other income)

 

 

See link here from HMRC websitehttp://www.hmrc.gov.uk/taxon/uk.htm#5

 

 

And scroll down to "Can you claim the tax credit if you don't normally pay tax?"

 

This will save you wasting additional accountancy costs which will result in the same response. I am sorry the news is not more favourable

 

Thanks

 

Sam

Customer: replied 2 years ago.


Hi Sam,


 


Thank you for jumping in. So are you in agreement on my first question taht I can draw dividends out of the UK company free from tax when resident abroad in SA?


 


On the second part which you responded to. Does that mean that I can use 10% of value of the divends paid as credit which I can then use for any income tax payments?


 


What happens if that 10% amounts to more than what is actually due on income tax? Can I reclaim that? I suspect not


 


Thanks and looking forward to your reply.


 


Regards

Expert:  Sam replied 2 years ago.
Hi


Thanks for your response

No you cannot draw out the dividend tax free - you draw out 90% of the value (leaving 10% notional tax credit in the company)
So for example - you wish to award yourself 1000 dividend - then you
1) must have at least £1111 profit left in the company - to make this £1000 payment
2) The £111 notional tax credit is not paid over to HMRC but remains in the company

And no, you cannot use the 10% value of the tax credit against your personal income tax payments or company tax owed - as its notional tax credit, and withdrawal of this £111 will then be treated as salary not dividend as you are taking funds out of the company which needs tax consideration (but as you are a non UK resident, I do not understand why you do not draw all your income out as salary as this WOULD be tax free - as a non UK tax resident)

Thanks

Sam



Expert:  bigduckontax replied 2 years ago.
I must say that was my initial reaction. I had always been under the impression that dividend tax credits could not be reclaimed although they are allowable against UK tax liability and presumably, under double taxation treaties, allowed as a credit against foreign taxation. However, HMRC information sites make it quite clear that it can be recovered through the 'receiving office,' whatever that may mean.
Customer: replied 2 years ago.


Hi Sam, Keith.


 


Just to let you know. I am closing the company down and want to withdraw the funds. Based on the below article even being a non-resident abroad I still have to pay income tax on a salary withdrawn.


 


http://www.hmrc.gov.uk/international/tax-incomegains.htm


 


Also if I withdraw the funds as dividends and the company is closed down, what happens to the 10% i leave in the company accounts?

Expert:  bigduckontax replied 2 years ago.
You should not have to pay income tax on any wages drawn as you are non resident in the UK. If it is deducted you can reclaim it or, alternatively, under the double taxation agreement between SA and the UK, have it set against your SA tax liabilities.

The company can only deduct tax using the tax code supplied by HMRC. You should check with your tax office (or the company) that the correct code, in your case 'NT' has been issued. If this is not the case you must take it up with the tax office to have it amended.

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