S32 Dividend Status

[Colin Harrison]

Dear Stephen,

I see that South 32, the mining company that de-merged from one of your previous recommendations, BHP Billiton, has announced a dividend consisting 4.3 cents (US) and a special of 3.0 cents (US)
(XD 8th March 2018, payable 5th April).

In general terms, are there any particular issues related to whether this share should be help within an ISA or not from the tax point of view of these dividends purely in order to recover any overseas tax? I note that previous HYP updates recommend that some companies, eg British Land for example, are more efficiently held in an ISA (or SIPP?) where possible due to the nature of the dividend format, and there was a related issue about TUI I think- does something similar apply to S32 ?

Apologies is this is covered in a forthcoming HYP update.

kind regards,

Colin

[Stephen Bland]

As far as I know S32 dividends, because of arrangements it has made with UK authorities, are treated like any other UK dividend in that no overseas tax is deducted. Same as BLT for example. So there are no particular tax issues indicating that this share is especially better off in an ISA but as a generality I advocate that HYPers use ISAs to the max anyway.

TUI is entirely different in that German withholding tax is applied to the dividend. Holding in an ISA makes no difference to that fact and the tax is not recoverable. However if held direct outside an ISA, foreign dividends like this are taxed differently from UK payouts in that credit is given for the German tax deducted up to the investor’s marginal income tax rate. Such foreign dividends are not part of the annual tax free dividend allowance.

[Colin Harrison]

Many thanks for that.

kind regards,

Colin

[Author]

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