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Hi Tutor,
I was watching a lecture and although I could see that students had asked what i was also confused about, I am not fully sure I understood the replies which I have seen, so i hope you do not mind me asking something which has been asked previously. Just to clarify I have understood, when it comes to grossing up the dividends, I have made a note as per the lecture that “no tax has actually been paid so there can be no repayment that could arise if credit exceeds tax liability” Can i clarify that this is only the case should the tax credits only have a figure which relates to dividends? IE in the examples we have tax credits that incorporate dividends, paye and bank interest and there has been a sum which has been repayable to the tax payer, however if in the tax credits there is only a figure as a result of dividends I would show this figure but the amount repayable would actually be 0? I hope this is clear to read! Thank you
If you want to ask the tutor something directly it is better to ask in the ask the tutor forum.I am not a tutor but will attempt to answer your question.Basically, the tax credit on dividends can never result in a repayment being due from HMRC Since it is basically a notional tax credit.After going through basic tax computation,the tax credit relating to dividends should be considered last before considering tax deducted at source.If credit relating to dividends is higher than tax liability calculated to that point then there is zero tax liability but no repayment from HMRC is due to taxpayer.After this has been done,tax paid at source should be considered.This can cause repayment to be due.Hope this answers your question.Please feel free to ask if it does not answer it or if you want more information.
Thank you mrjonbain for your response! I have since asked the question in the ask the tutor forum. The particular example I was referring to is example 5 from the videos and notes here where the income tax repayable amounts to 112. Would it be possible you could refer to this to be sure I have understood your answer above. The dividends credit in this example amounts to 200 and the tax liability is 3200, so if the dividends credit solely had been more then 3200 then then the amount repayable from HMRC would be 0? Thank you for taking the time to help me out! I really appreciate it.
From what you have written here I think you have understood what I was trying to convey with my reply-if tax liability were 3200 and dividends credit had been say 3600 before taking credit relating to dividends into consideration then liability would only reduce to zero.Hope this was helpful.Please feel free to ask more on this or any other topic.
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