UK income tax on overseas dividends

I've had a few e-mails regarding the changes in the budget to the taxing of overseas dividends. If you remember, the Budget changed the UK treatment so that overseas dividends can now in certain circumstances be taxed in the same way as UK dividends. This means that the 10% deemed tax credit will be able for offset against the UK liability, and that any basic rate taxpayers won't have a UK tax charge on the dividend receipt. This treatment though doesn't apply to all overseas dividends and you'll need to receive dividends from such companies of less than £5,000 per tax year and also hold less than 10% in the company. People have e-mailed asking what about if they own 100% of an offshore company. Well you'd think based on the above that they wouldn't get the deemed tax credit etc. However for most of these cases they will! The reason? Well when I refer to 'overseas' companies above I'm really referring to non UK resident companies. If you are UK resident and own 100% of an overseas company, the chances are the taxman will class it as controlled from the UK. It will therefore be a UK resident company and subject to UK corporation tax, in a similar way to a normal UK company. The other aspect to this is that dividends received from such a company will simply be dividends from a UK company, and therefore will be taxed just like other UK dividends. So if you own 100% of an offshore company you'll probably get the UK tax treatment anyway. For more on extracting profits check out this article: The best way to extract profits