Hundreds of thousands of UK-based Santander shareholders can look forward to
a tax credit on any dividends from their stock after Gordon Brown surprisingly
extended the tax relief on dividends to foreign shares.
Abbey National members were issued shares in Santander following the Spanish
Bank’s acquisition of the building society in 2004. Until the Budget
announcement these individuals were unable to receive a tax credit on their
shares as they were held in a foreign company.
Groundbreaking Manninen and Meilicke decisions in the European Court of
Justice ruled that it was unlawful to treat foreign dividends differently to
domestic counterparts. Brown’s move surprised experts who were amazed that the
Treasury had implemented an adverse ECJ decision.
‘This is the first time the EU has not had to force the UK to follow an ECJ
judgement,’ said Bill Dodwell, head of tax policy at Deloitte.
The tax credit will be limited to dividends up to £5,000, so it will only
benefit small shareholders as opposed to City traders and brokers investing
abroad. The measure will cost the government £5m in 2008/2009 and £15m in
‘The cap on the dividend eligible for relief does leave the UK open to
further challenges under EU law, but it will take a wealthy individual with the
resources to take a challenge through the courts,’ Dodwell said.
Does Darwin's theory apply to taxation? Colin ponders...
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