The company said the massive loss was due to most foreign countries imposing a tax before dividends could be paid to overseas shareholders. Where the UK has a double taxation agreement, investors are legally entitled to reclaim the difference between the rate the foreign country normally applies and the reduced rate specified in the relevant treaty.
Seamus Murphy, a senior tax manager at taxback.com, said the implications for British investors were significant.
“Recent research suggests that only 7% of DWT is reclaimed globally and if you translate this into those in the UK with overseas assets in their portfolios, the loss could be upwards of £1bn per year,” he said.
As an example, he said that Swiss dividends are typically paid to UK residents minus a 35% DWT, while the terms of the UK-Switzerland double tax treaty limit the liability to 15% for UK shareholders owning less than 10% of the Swiss company. On a £1,000 dividend, this allows £200 of the £350 tax to be reclaimed.
UK shareholders who own more than 10% of a Swiss company are entitled to reclaim the full 35% of DWT if it has been applied by the payor.
“Many in the UK either don’t know they can reclaim or think it is too much hassle,” Murphy said.
“The numbers are huge. Even when you take into account the many switched-on investors that have done the paperwork in major jurisdictions like the US, still more than half is likely to be going unclaimed.”
Taxback.com has a launched a new service for UK investors wishing to reclaim DWT which goes back at least three years and in some cases longer.
