Income Tax Act 2007 section 812A

Temporary non-residents

Section 812A targets individuals who leave the UK temporarily and receive certain investment income from close companies during their period of non-residence, ensuring that income is taxed on their return.

• Where a temporarily non-resident individual receives dividends or stock dividends from a UK close company in which they were a material participator (or associate of one), that income is added to their taxable income in the year they return to the UK.
• A credit is given for any notional UK tax already accounted for on that income during the non-resident year, preventing double taxation on the same amounts.
• Dividends paid out of trade profits earned by the distributing company after the individual's departure are excluded from this clawback, so only pre-departure profits distributed during absence are caught.
• Double taxation treaties cannot override this charge, and various apportionments — such as how much of a dividend relates to post-departure profits — must be made on a just and reasonable basis.