If in the tax year of receipt, the taxpayer is a non-UK tax resident and the dividend income from a UK company is treated as disregarded income, would there be any tax adjustments if they subsequently became a UK tax resident again in the following tax year (they were previously UK tax resident in the tax years prior to the tax year in which they received the dividend)? Are there any ‘clawback’ rules as there are with capital gains tax?
Arthur Weller replies:
What you have described is a scenario of 'temporary non-residence'. Special rules apply to UK distributions from a close company to a participator if: (a) they arose during a period of temporary non-residence in a year for which the individual was non-resident; and (b) the UK charge was limited by the terms of a double taxation treaty. Such dividends are taxed further in the year of return. The additional tax is calculated such that the overall tax paid is the amount that would have been paid if the individual had not been temporarily non-resident. So, the answer to your question is ‘yes’.
This question was first printed in Business Tax Insider in December 2018.