Income Tax (Trading and Other Income) Act 2005 section 402

Charge to tax on dividends from non-UK resident companies

Section 402 establishes the income tax charge on dividends received from companies that are not resident in the United Kingdom, and clarifies that capital dividends are excluded from this charge.

• Income tax is charged on dividends paid by non-UK resident companies, but not on dividends of a capital nature
• An exemption exists for amounts applied by Share Incentive Plan (SIP) trustees to acquire dividend shares or retained for reinvestment
• No tax charge arises on shares that cease to be subject to a SIP in certain circumstances under ITEPA 2003
• Whether a dividend is income or capital in nature must be determined by analysing the payment under the relevant local law of the paying company