The first dividend paid by a company in a tax year is called the ‘benchmark dividend’. The ratio between the company’s credits and dividends used in this payment sets the benchmark dividend ratio.
The company must use the same ratio for the rest of that tax year. If the benchmark dividend has no credits attached, the company cannot attach credits to any other dividends it pays in that tax year.
An exception to this rule applies if:
- later dividend payments will not give a tax advantage, and
- they complete a Ratio change declaration form - IR407 before a subsequent dividend is paid.
The benchmark dividend rules do not apply to supplementary dividends paid under the foreign investor tax credit (FITC) rules.