TQOTW: Excluded Income

My client is a non-resident in receipt of UK dividends and is also a partner of a UK trading partnership which also receives UK dividends from its investments. I note s811 ITA 2007, limits the amount of tax the individual pays in the UK by disregarding the dividend income. Does this mean no income tax is due on the personal and partnership dividends?

S811 ITA 2007 places a limit on the UK tax liability of an individual who is not a resident in the UK. It only applies if the individual is non-resident for the whole of the tax year and does not apply in split years.

You need to prepare two tax computations:

  • The “normal” tax computation takes into account the individual’s taxable income less personal allowances (assuming personal allowances are available – not always the case).
  • The tax computation in which certain income will be disregarded under s811 ITA 2007 to calculate the tax liability without personal allowance.

The overall tax liability would be whichever result is the lower. HMRC has some guidance at SAIM1170 and in HS300.

ITA 2007, s813 defines disregarded income, to include:

  • interest;
  • income from annual payments such as royalties;
  • dividends from UK-resident companies;
  • purchased life annuity payments;
  • profits from deeply discounted securities;
  • income from unit trusts;
  • some social security benefits (such as the state pension);
  • retirement annuities

In addition, where a non-resident receives dividends from UK companies, they are treated as having paid tax at the dividend ordinary rate (i.e. 7.5%) on the amount of the dividend – s399 ITTOIA 2005 – see SAIM5120.

However, if a non-resident is running a business through a partnership with a UK permanent establishment, then the UK partnership would be a representative of each non-resident partner (s835C and s835E ITA 2007). Therefore, s813(2) ITA 2007 applies and that partnership income cannot be disregarded.

As a UK representative, the partners are jointly liable for the tax payable by the non-resident partners on their share of the partnership income. Therefore partnerships with non-resident partners usually have arrangements in place to cover possible liabilities that the UK resident partners may be asked by HMRC to pay. HMRC’s guidance is at INTM268020.


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Tax Adviser
Ghulam Mustafa


Ghulam started his career in tax in practice after initially worked for Deloitte as auditor. Prior to joining the team, he has worked in practice as Tax Manager where he has gained experience in wide range of taxation matters. He has experience of dealing with high net worth individuals, overseas taxation issues and owner-managed business and tax enquiries. He is a member of ACCA since 2014 and is studying toward his Chartered Taxation Advisor.

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