Offshore ETFs: Not Reporting or Distributing :S

bostonerimus

mike_302 wrote: »

The Canadian tax authority advised me that after I filed my last tax assessment, I would only ever have to file anything to the UK authorities. They said that any taxable capital from remaining funds would simply be taxed at the 15% rate, and that amount would be taken out automatically (as it has). So then, what does the HMRC need to know out of that table?

From a quick look at the tax treaty (Article 13) suggests to me that your Canadian capital gains are only taxable in the UK. So if you've already had 15% treaty tax withheld from the Canadian dividends you'd declare all your Canadian dividends and capital gains on your UK self assessment, claim a foreign tax credit for the 15% Canadian withholding on the dividends and pay the remaining UK tax bill at your marginal income tax rate.

mike_302

Are you able to help me understand the different headings associated with distributions in those tables? I've added my own understanding in this list as well. Genuinely, if you are able to help me understand this enough that I can comfortably file my self assessment, I will happily send a small token of appreciation your way :P This has been a monstrous task for such a small savings pot like mine...

1. Cash Distribution per Unit: this is the dividend that is paid into my account on the scheduled payment dates.
2. Reinvested distribution per unit: this is an amount that doesn't change the number of shares I hold, or pay funds into my account, but it's recorded in the background. I believe I count this as a Capital Gain and report as such in me HMRC Self Assessment.
3. "OTher Income": this value corresponds to the dividends that I received, at least in the case of VAB.
4. Foreign Income?
5. Foreign Withholding tax? Can I claim this as a tax credit? Not to be confused with the actual 15% amount that is withheld from me, by my brokerage for the payment of the Canadian tax for non-residents...
6. Eligible dividends: I don't understand why the cell corresponding to VAB Eligible Dividends doesn't have a number in it... IS it that the VAB payments (cash distributions) are not actually eligible dividends, and as such, I don't have to report these?
7. Capital Gains seems straightforward... But then see no. 9.
8. Return on Capital: I understand this value is not taxable immediately --- I have a third-party service that uses the "return on capital" distributions to readjust the value of my position on the stock (that is, it adjusts my book value down so I woudl in theory pay a higher capital gains tax when I sold, if I sold up).
9. Taxable Capital Gains? Different from capital gains?
10. Total Income? (I suspect this one is more of a summary, and not necessary for my tax calc purposes)

bostonerimus

All those terms mean something under Canadian rules, but not necessarily under UK law. Canada might have a couple of different categories for capital gains distributions when the UK doesn't have any. I could help if it was a US fund, but I suggest you go onto some Canadian/UK expat sites and ask there, or pay a dual qualified tax professional.

It might be best to sell your Canadian funds and move then to the UK....it would certainly be far more tax efficient if you can use and ISA.

mike_302

Thanks for all the support.

I think my strategy is going to be to do the best calc I can (i.e. the obvious capital gains calc, the dividends calc, and the 15% withholding tax) and submit... It's really a small amount I'm dealing with... If I'm off, I may be off by a two-digit (or small three-digit) sum of tax-owing, and it would not have been intentional so would simply be readjusted after an HMRC review. Because it's such a small amount, it's not worth a dual qualified tax professional.

Also, I'm not certain how long I will be outside of Canada, so I'm hesitant to make that big switch of funds from Canada to the UK. Hell, the British pound may not even be worth a Canadian dollar in a couple years...
I just discovered Vanguard's LifeStrategy offering though, and I love it! I have to get an ISA open first, then I think that's where I'll put my UK pot of money... I wish they offered that product in Canada...

bostonerimus

If it's a small amount I'd move it to save the hassle. I looked into how to deal with accounts outside of retirement tax wrappers in case I move back from the USA to the UK. It's doubly tricky or a US citizen because you always have to file and pay US tax. But as US Vanguard ETFs are UK reporting and many don't distribute capital gains it's actually not too bad. Without the Vanguard ETFs I'd probably sell before I moved and put it in Berkshire Hathaway to avoid issues with cross border pooled investments.

mike_302

I should say, it's a small amount in dividends and capital gains, meaning a small taxable amount... If I were to sell and move to the UK just to simplify things, I'd pay income tax in a few thousand in capital gains, and have the major currency risk to deal with. I'm not convinced it's not better to just leave it all and pay the miniscule tax on the capital gains distributions and dividends. If the portfolio became massively unbalanced, I could fix it and just suck up the fees for that one year... Basically, it's no worse than not rebalancing my portfolio for a few years. Also motivates me not to touch any of it :P