SAIM5120 - Dividends and other company distributions: tax treated as paid on distributions received by non-UK resident persons
Distributions received by non-UK resident persons
For tax years up to 2025-26, ITTOIA05/S399 dealt with the tax treatment of distributions received by non-UK resident persons. S399 was recast by FA16/S5 and SCH1 following the abolition of dividend tax credits effective from 6 April 2016. Formerly the provision applied to "qualifying distributions received by persons not entitled to a tax credit". Examples of these were non-UK residents who were not ‘eligible non-UK residents’, but it should be noted that a tax credit with a nil value (SAIM5100) was still a tax credit, and section 399 did not apply to it.
The amended S399, like its predecessor, treated a non-UK resident as having paid income tax at the dividend ordinary rate (SAIM1080) on the amount or value of the distribution.
For tax years up to 2015-16 the amount or value of the distribution was the ‘grossed up’ amount of the distribution, unless the recipient was a non-UK resident company beneficially entitled to the income. SAIM1090 explains the concept of ‘grossing up’.
ITA07/S1025 excludes ‘non-qualifying income’ in the calculation of a person’s ‘modified net income’. ITA07/S1026 defines ‘non-qualifying income’ and includes at S1026(a) distributions from UK resident companies on which there is no tax credit - see SAIM9060).
ITTOIA05/S399 did not apply to a UK resident who is a party to certain stock lending or repo arrangements (ITA07/S592 to S594).
From tax year 2026-27 onwards S399 has been abolished, which means that non-resident individuals will no longer receive a non-repayable tax credit for income tax they were treated as having paid at the dividend ordinary rate on their UK dividend income. UK dividend income remains non-taxable on the majority of non-UK residents, with the exception of individuals who also have taxable UK income.