Question
Could you please clarify how withholding tax works for foreign shares held within a SIPP?
My issue is that my SIPP provider does not provide any support in claiming back part of the withholding tax on US or European shares (I know that I should be able to claim back anything above 15% due to bi-lateral agreements between UK and US/European countries).
If I wanted to do that by myself, will I have to contact the tax offices in each country?
If so, how will I get around the fact that the shares are held in a nominee account, therefore are not in my own name? (which is standard practice for SIPP/ISA accounts).Answer
For the benefit of other readers, foreign withholding taxes are often deducted from dividends paid by foreign companies to investors who are tax resident in a different country. For example, 30% withholding tax is normally deducted on dividends paid by US companies to UK investors.
As you point out, the UK has double taxation agreements in place with many countries that usually allow you offset some of the foreign withholding tax against your UK liability. Although the offset amount varies between countries, it's most commonly 15%.
In the case of the US it's possible to complete form W-8BEN to reduce the rate of US withholding tax from 30% to 15%, but if the country concerned doesn't have a similar agreement a tax refund must be sought from the tax authority in the country concerned - which can be harder than getting blood from a stone (from what I've heard some take a long time to pay while others don't bother).
Holding foreign shares in a SIPP or ISA makes no difference, the withholding tax is still deducted. So it's a real pain that your SIPP provider doesn't handle the above for you.
If you want to try and reclaim withholding tax you'll have to contact each country's tax office separately, although the HMRC Residency centre in Nottingham (0151 210 2222) can sometimes supply the necessary forms. If you do apply you may face a long wait...
Holding shares via a nominee account should not preclude a tax reclaim provided you can supply a nominee statement to confirm you own the shares along with a tax voucher for the dividend received (your SIPP provider should provide this, if nothing else).
If the amounts are significant you might consider transferring to another SIPP provider who does reclaim withholding tax, although you'll need to weigh up whether it's cost effective to do so and I think most only reclaim withholding tax from a handful of countries (US being most common via a W-8BEN form).
The alternative is to buy foreign shares that pay little/no dividends (although this reduces investment choice) or use investment funds where the manager sorts the tax reclaim process (they should as a matter of course).
Could you please clarify how withholding tax works for foreign shares held within a SIPP?
My issue is that my SIPP provider does not provide any support in claiming back part of the withholding tax on US or European shares (I know that I should be able to claim back anything above 15% due to bi-lateral agreements between UK and US/European countries).
If I wanted to do that by myself, will I have to contact the tax offices in each country?
If so, how will I get around the fact that the shares are held in a nominee account, therefore are not in my own name? (which is standard practice for SIPP/ISA accounts).Answer
For the benefit of other readers, foreign withholding taxes are often deducted from dividends paid by foreign companies to investors who are tax resident in a different country. For example, 30% withholding tax is normally deducted on dividends paid by US companies to UK investors.
As you point out, the UK has double taxation agreements in place with many countries that usually allow you offset some of the foreign withholding tax against your UK liability. Although the offset amount varies between countries, it's most commonly 15%.
In the case of the US it's possible to complete form W-8BEN to reduce the rate of US withholding tax from 30% to 15%, but if the country concerned doesn't have a similar agreement a tax refund must be sought from the tax authority in the country concerned - which can be harder than getting blood from a stone (from what I've heard some take a long time to pay while others don't bother).
Holding foreign shares in a SIPP or ISA makes no difference, the withholding tax is still deducted. So it's a real pain that your SIPP provider doesn't handle the above for you.
If you want to try and reclaim withholding tax you'll have to contact each country's tax office separately, although the HMRC Residency centre in Nottingham (0151 210 2222) can sometimes supply the necessary forms. If you do apply you may face a long wait...
Holding shares via a nominee account should not preclude a tax reclaim provided you can supply a nominee statement to confirm you own the shares along with a tax voucher for the dividend received (your SIPP provider should provide this, if nothing else).
If the amounts are significant you might consider transferring to another SIPP provider who does reclaim withholding tax, although you'll need to weigh up whether it's cost effective to do so and I think most only reclaim withholding tax from a handful of countries (US being most common via a W-8BEN form).
The alternative is to buy foreign shares that pay little/no dividends (although this reduces investment choice) or use investment funds where the manager sorts the tax reclaim process (they should as a matter of course).
Read this Q and A at http://www.candidmoney.com/questions/question525.aspx
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