From: Biwah 
Newsgroups: uk.finance
Subject: Re: US Dividend Question
Date: Sat, 12 Feb 2005 16:05:44 +0000

On 11/2/05 7:25 pm, in article lddvd2-s9g.ln1@michelle.jbryce, "Jonathan
Bryce"  wrote:

> Tumbleweed wrote:
> 
>> Some brokers and institutions let you do this by web form, I did this only
>> a few weeks ago. Or you may be able to fax it.
>> But if you cant fix that why not declare what you received (eg accounting
>> for the 15% missing)
> 
> Because then you get taxed on the same income twice.


Correct info:

1) The treaty rate is 15%. It seems you probably did file the appropriate US
form (W8; W2 is for employee withholding (PAYE)) Sample at:
www.ibm.com/investor/services/pdf/W8Form.pdf

2) If, for some reason, you are entitled to a refund of that tax -- because
you are otherwise taxable in the US -- file a nonresident (form 1040-NR --
download it from http://www.irs.gov) or a resident form 1040 after January
1, 2005. Get a refund of the excess tax withheld.

3) Claim a credit on your UK tax for the year ending April 5, 2006 of
whatever tax you paid to the USA. You would be well advised to include a
note on your tax return for April 5, 2005 explaining what you are doing, in
case your tax inspector disagrees about the appropriate year. (If you forego
the credit in the earlier year, and you lose on the issue of the later year
being the appropriate one, you can lose the credit too. Unless you make full
disclosure.)

The relevant Tax Treaty provision:

"ARTICLE 10
"Dividends

"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.

"2. However, such dividends 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 dividends are beneficially owned by a
resident of the other Contracting State, the tax so charged shall not
exceed, except as otherwise provided,

"a) 5 per cent. of the gross amount of the dividends if the beneficial owner
is a company that owns shares representing directly or indirectly at least
10 per cent. of the voting power of the company paying the dividends;

"b) 15 per cent. of the gross amount of the dividends in all other cases.
This paragraph shall not affect the taxation of the company in respect of
the profits out of which the dividends are paid."
 

UK double taxation relief:

Inland Revenue Manual
http://tinyurl.com/6h5sl

Relevant statutory instruments
http://tinyurl.com/4dtxv


You can download SA106 notes for further information:
http://www.inlandrevenue.gov.uk/worksheets/sa106-notes.pdf