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Final dividend credit decision goes against non-taxpayers

In the 1997 Budget the Chancellor announced the withdrawal of payable tax credits as part of the package to reform the corporation tax system as a whole. Amongst other things it meant that individuals would not longer be able to reclaim the tax credit after 5 April 1999. This ground has been pretty well covered within Techlink and elsewhere.


Following representations from interested groups during the passage of the Finance Act 1998 ministers undertook to look again at the arrangements for individuals. The main concern centred on the plight of non-taxpaying pensioners whose investments are an important source of income. However, the ministers have decided that payments of tax credits on dividends to individuals will be withdrawn as planned with effect from 6 April 1999.



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It was hoped that these &#34non-reclaim&#34 provisions would be relaxed for non-taxpayers. Such a relaxation would have helped structures founded on mutual funds producing income (on which tax credits would be reclaimed) to be used in tax effective funding for further education. However, it is not to be. Non-taxpaying investors (from a tax standpoint) should look then to producing gross income (or income on which tax can be reclaimed) from other than equities or to focus on capital gains which most cases (given the availability of the annual exemption) would be tax free.

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