Foreign Tax Credit Relief on overseas dividends

I am a basic rate tax payer. In 2022-23 I received a dividend of over £2000 from French shares and less than £200 from Spanish shares (Santander). Both have had withholding tax removed. My understanding is that: There is a double taxation agreement with both countries. I should fill in the foreign dividend section giving the details of the 2 shares separately I can only claim FTCR at the rate I would pay in the UK - currently 8.75%. The pull down section on the online form for the rate I am claiming appears not to have been updated as there is no value of 8.75%. I tried putting in 8% but it gave an error message.It will only accept 7.5%. What do I do? I have tried the HMRC digital help but the computer just refers me to the double taxation agreement. A reply from someone from HMRC please

Hi Anne Fendley,
This section refers to the maximum rate that can be applied on the foreign shares rather than your rate.
Both these are limited to 15% so you will select that.
Thank you. 
 

But the notes say that I can only claim the rate I would pay in the UK. Does the software automatically drop it down to 8.75%?

I have the same issue as this, my share dividends are from a company based in the USA, and they have had 15% US tax deducted at source (there is W8-BEN in place).

Hi Anne Fendley

The drop down is for the rate applied in the country the dividends arose as this is the maximum you can claim should your dividends be taxed at a higher rate in the UK.
If only liable at 8.75% then this will be applied in the calculation.

Thank you

Hi maninthestreet

Article 10 of the UK/USA tax treaty, allows for the USA to deduct tax of 15% on dividends. 
Please see UK/USA DOUBLE TAXATION CONVENTION
You can claim a foreign tax credit up to a maximum of 15% of the dividend in your self assessment tax return.  
If you are submitting a paper tax return, you can elect to have HMRC work this out for you or you can do this yourself, using HS263 Relief for foreign tax paid (Self Assessment helpsheet HS263)
If you are completing your tax return online, the system can work this out for you.

Thank you

I have dividend income over £2000. This includes a number of foreign dividends, and those from Netherlands, Switzerland and Finland have foreign tax deducted. From my reading of the Digest of Double Taxation the Foreign Tax Credit Relief for Netherlands and Switzerland is 15% and Finland is given as Full Relief. Is this correct? The earlier questions and answers in this thread would suggest when doing my online Self Assessment after saying I wished to claim Foreign Tax Credit on these dividends then in the drop down box for %age I should put in 15% for Netherlands and Switzerland. But when I do this is not allowed and the highest I can select is 12.5% For Finland “full relief” might suggest 100% but this is far higher than any option given, and in fact the highest I can select is again 12.5% Dividing the foreign tax taken by the gross dividend works out at 15% for Netherlands and 35% for Switzerland and Finland. Please can you advise what percentages I should choose for the drop-down box and explain where/if my understanding is wrong. To me it seems a very confusing section, I have no trouble anywhere else with the return. Thanks

Hi Ben,

The drop down is in order to show the maximum relief that can be claimed. As relief is restricted to the UK tax that is due on the same source, you may not actually get 15%. further guidance is at:

Relief for Foreign Tax Paid 2023 (HS263)

Thank you.

So I can select the highest %age the drop down box lets me provided it is no greater than the treaty %age (and it may be less)? The system will will adjust to the appropriate rate.

Hi Ben Finlay,
You are correct. 
Thank you. 

Hi, Please help, I am struggling to know how to complete my 2022/2023 Self Assessment. I have a similar situation to 'maninthestreet'. 1. I work for a US company who annually give me shares (known as Restricted Stock Units RSU) which I sell (exercise) almost immediately on receiving. Restricted Stock Units are shares of stock that are GRANTED to employees by US companies. The RSUs 'VEST' at some point in the future and usually in stages (at a particular date every year). On the date they are GRANTED, there is no tax event. On the date they VEST (i.e.shares now owned by the employee), the value of the vested amount is taxed as Earned Income. This happens through my UK payroll. I see entries in my payslip for the £ sterling value of the entire GRANT PLUS a £ sterling deduction (WITHHELD) for the units that were sold to pay the tax. The amount of deduction is high because the Employer is allowed to take EMPLOYERS National Insurance owed out of the value of the GRANT. The EMPLOYERS National Insurance amount is not included in my annual income shown on my P60. Am I allowed to claim back on my Self Assessment Tax Form the amount of EMPLOYERS National Insurance (13.8%) amount that was taken out of my RSU value ? Can I make this claim in the section 'Foreign Tax For Which Tax Credit Not Claimed' 2. In addition to the EMPLOYERS NI, my company withhold some shares to pay for EMPLOYEE NI and PAYE. This amounts to roughly Employee PAYE (34.48%) and Employee NI (2%). The full gross amount of my RSU value (before Employee NI & PAYE taken out) is included in my P60 value - this pushes my annual income over 100k and therefore my Personal Allowance is reduced accordingly. I therefore end up paying tax twice on the same amount: a) First time when RSUs are VESTED when RSUs are withheld to pay for Employee NI and PAYE. b) Second time when my Personal Allowance is reduced as P60 shows income greater than £100k Can I claim back on my Self Assessment Form the PAYE and NI already paid when they were first vested so that my Personal Allowance amount is not impacted ? Can I make this claim in the section 'Foreign Tax For Which Tax Credit Not Claimed' Note - I sell my RSUs as soon as they are vested, meaning there is no Capital Gains Tax to pay for RSUs. Please confirm if this is correct ? Thanks, Eric

Hi Stressed Eric

As the payment is from your employer, the income should be shown in the employment section if it is included in your P60.
You would then claim credit for the Tax in the foreign section under 'Employment, self-employment and other income which you paid foreign tax on'.
If it's not included in your P60, please include it on the box on the employment page for 'Tips and other payments not included on your P60'.  
ERSM20193 advises that when RSUs payout at the market value on what is called "dividend equivalents" in either cash or shares, such payments will generally be taxed as earnings in the year they are received. 
Please see ERSM20193 - Employment-related securities and options: what are securities: RSUs and dividend equivalents.  
The shares held back to pay the tax should still be either reflected in the P60 figure and the tax paid in the foreign section of the tax return.

Thank you

Thank you for the information HMRC Admin 25. I have reviewed ERSM20193 and believe my scenario is simpler. My only concern is that I am being double taxed for my RSUs, first time when I receive the RSUs approx. 60% of the RSUs value is withheld as tax. At the end of the year, I am taxed again on the full gross amount of the RSU. To correct this, my understanding is that I can put the value of the tax already paid on my RSUs (approx. 60% of the RSU value) in the section'Employment, self-employment and other income which you paid foreign tax on' - because the RSUs were given by my employer based in the US. As an example: Annual Salary £70,000 RSU Grant shown in September Payslip £10,000 LESS RSU Withheld to pay for Employer NI/ Employee NI / PAYE shown in Sept payslip £6,000 The P60 figure for annual income includes the full RSU grant £80,000 The total value of Tax Deducted in my P60 INCLUDES the £6000 of tax paid for RSU i.e. RSUs withheld. The actual monetary value received for RSUs is September £4000 (10,000 minus 6,000) My tax in the Self Assessment Form is calculated at the end of the year on the TOTAL ANNUAL INCOME i.e. 80000 I have already paid the tax on my RSUs via the RSUs withheld i.e. 6k To correct this double taxation my understanding is that I can claim credit for Tax in the foreign section under 'Employment, self-employment and other income which you paid foreign tax on'. Based on the above example, the figure to include in 'Employment, self-employment and other income which you paid foreign tax on' section is the amount already withheld to pay for the tax i.e. £6000. Is this correct? Thank you, Eric

Hi Stressed Eric,
Yes this is correct.
Thank you.

 

Hi HMRC team, I have the same issue as described by 'Stressed Eric', in the above thread. I have been receiving RSU's from my employer, a US company, since 2018. I currently do not fill in a self assessment tax return, as I have historically assumed that my employer calculates the tax correctly, on my behalf. However, this is not the case - I am being double taxed, in exactly the same way, as 'Stressed Eric' has described. I have two questions: 1. I believe that I can claim the overpaid tax back, for the last 4 years, from what I have read. Can you please confirm if this is correct? 2. How do I initiate the process, to claim the overpaid tax back? Many thanks - appreciate your help.

Hi,

You will need to complete a tax return for each of the last 4 years, so that you can claim tax relief on the RSU payments. The payments are usually included in your P60 pay figure, so you would show this in box 1 of page E1 of SA102.  

If the RSU payment is not included on your P60, you would declare the amount in box 3, 'tips and other payments not on your P60'. As foreign tax is paid on the RSUs, you would need to claim a foreign tax credit on SA106, foreign, in the section for 'Employment, self-employment and other income which you paid foreign tax on'. You claim a foreign tax credit in box 2 of up to 100% of the foreign tax paid. You can see guidance here:

ERSM20193 - Employment-related securities and options: what are securities: RSUs and dividend equivalents

You can register for Self Assessment here:

Check how to register for Self Assessment

You can complete the last 2 tax returns online below, you will need to obtain a government gateway user ID and password to do this:

File your Self Assessment tax return online

You can request paper supplementary pages below, or contact the tax return orderline so that paper versions can be sent to you:

Self Assessment tax return forms

Self Assessment: forms ordering

Thank you.

Admin's response: "Posted 8 months ago by HMRC Admin 32 The drop down is in order to show the maximum relief that can be claimed. As relief is restricted to the UK tax that is due on the same source, you may not actually get 15%. " My question for Admin's answer:: As foreign tax credit relief is restricted to the UK tax that is due on the same source, which is 8.75% in case of dividends, why isn't there an option in the online self-assessment form of 8.75% for FTCR? I can only choose the 8% option and therefore have to pay double tax of 0.75%. So isn't this an error on the HMRC website due to the lack of an update on the dividend tax rate in the UK? (I wanted to point out that I pay tax on Polish dividends of 19%)

Hi Czarek

8.75% is the basic dividends rate of tax applied in the UK.  The foreign tax credit is not referring to this.
If the UK has a tax treaty with another country, you need to review the article that applies to dividends.  That article will declare the limit of relief.  
For example the tax treaty with France has article 11 covering dividends and it states relief is limited to 15%.  
This is the limit for foreign tax credit relief.  The agreements between countries differ, which is why you need to confirm the agreed relief.  
A list of treaties with the UK can be found at Tax treaties.

Thank you

Hi Admin Article 10 of the UK/POLAND DOUBLE TAXATION CONVENTION, which concerns dividends, states: "(1) Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State. (b) [...] may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed 10 per cent of the gross amount of the dividends." I understand that the FTCR rate cannot exceed 10%. I have a specific question in this regard: Which "Rate of tax credit relief allowed" should I choose from the options available online on the HMRC website when completing the "Dividends from foreign companies" section of my self-assessment/tax return for dividends received from Polish companies? Up to 10%, there are the following tax credit relief rates to choose from: 0%, 2%, 3%, 5%, 7%, 7.5%, 8%, 10%. Please tell me which option I should choose in my case.

Hi Czarek

It will be the 10% as that is the maximum relief due. The FTCR cannot exceed the actual UK tax due on the same income.

Thank you