Vanguard dividends and tax return

Murmansk

I've had some money in Vanguard Lifetrategy since September and am in the process of filling in my tax return.

I need to know what dividends I've received so I can put that figure on the return but I can't seem to find the info within my account on Vanguard's website. Am I looking in the wrong place or is this something Vanguard will produce in due course?

There's no rush as I have until the end of January but it's the only bit of my return I can't complete

bostonerimus

I assume these funds are outside of an ISA

Murmansk

bostonerimus wrote: »

I assume these funds are outside of an ISA

Yes they are indeed

grey_gym_sock

the lifestrategy funds seem to pay dividends annually, at the end of may (with an ex-div date at the start of april). so i don't think you bought early enough to receive any dividends in last tax year.

if you're invested via vanguard's platform, presumably they'll produce a tax summary after the end of the tax year (though i don't know whether they'll issue one saying you had 0 dividends last tax year).

talexuser

Do Vanguard ETFs give rise to a tax certificate (if dividends are reinvested like acc funds) or are they based purely on price and capital gain?

londoninvestor

For the ETFs, which are offshore (i.e. Ireland), you'll need to pay tax based on the "excess reportable income" of the fund. Useful link to Monevator article.

This is conceptually similar to tax on the dividends of an accumulation fund, but tends not to be presented to you in so user-friendly a form. You can find the underlying data in fund accounts which Vanguard will have on their website, but I'm not sure if they will personalise this into a convenient statement for your specific holdings.

Sand_castle

I contacted Vanguard regarding a tax certificate last month, this was their reply

"Thank you for your message and for being with Vanguard through our first tax year in the UK.

We’re working hard on producing the annual tax statement for our clients with General Investment Accounts as soon as possible, however we are unable to provide a firm date at this stage. You’ll be notified when it’s ready and it will be in the documents section of your inbox"....

talexuser

Thanks london, all my Vanguard ETFs have quarterly dividends, but I've considered some semi active ones e.g. Global Momentum, which do not and act like acc funds.

londoninvestor

talexuser wrote: »

Thanks london, all my Vanguard ETFs have quarterly dividends, but I've considered some semi active ones e.g. Global Momentum, which do not and act like acc funds.

Just to note, the dividend-paying ETFs (i.e. the equivalent of income units) can have excess reportable income too, which you need to treat as a taxable dividend. (Like an accumulation dividend, you can deduct it from your CGT cost basis).

Here are the latest published numbers for the Vanguard funds. These relate to the year 1 Jul 2016-30 Jun 2017, and the income is deemed to be received on 31 Dec 2017, so it goes on your 2017-18 tax return.

Document link

talexuser

Thank you for that. I have FTSE 250, Europe Ex UK, Japan and North America (all bought this tax year), and looking through the list see that last year the only one with excess was North America with a value of 0.0005 (pence?). So would I have multiplied my number of units by this to work out an additional dividend to declare for tax? And how does that work out for CGT please?

bowlhead99

talexuser wrote: »

Thank you for that. I have FTSE 250, Europe Ex UK, Japan and North America (all bought this tax year), and looking through the list see that last year the only one with excess was North America with a value of 0.0005 (pence?). So would I have multiplied my number of units by this to work out an additional dividend to declare for tax? And how does that work out for CGT please?

The reporting currency of the fund is US dollars so you would multiply the number of units you held by 0.0005 dollars. So if you had 1000 shares (a pretty big holding) you would have had about $1000 of actual distributed dividends during their July 2017 to June 2017 financial year (20 to 30 cents per share, each quarter) and then 0.0005 cents per share, or 50 cents total, of undistributed income which is deemed to be distributed to you six months after the end of their financial year (ie 31 December 2017).

The 50 cents would round down to zero pounds so I wouldn't bother to include it in my tax return. However, if I had 10000 shares instead of 1000 shares the undistributed income would be $5 and I would include the equivalent (three or four quid) in my tax return (I do a tax return anyway). But having that number of shares would imply I had several hundreds of thousands invested in that one fund. For the distributing funds, they usually do a pretty good job of distributing all the income. It's the accumulating funds where they deliberately don't, and you might have more substantial numbers coming through.

In terms of impact on CGT. Let's say you did have the 10000 shares and had recognised $5 of income on your tax return as being allocated to you on 31 Dec 2017. That money didn't come to you in cash, it's your money but it was internally reinvested in the ETF on your behalf. So when you eventually come to sell all the shares, you can include the $5 (if you sell all of them, or $0.0005 per share if you only sell some of them) as an additional allowable cost of your shares to compare with the sales proceeds of your shares to work out what gain you made for CGT purposes.

If you didn't include it in your CGT tax calculation the effect would be that you'd paid both income tax and CGT on the gain. Well, I say paid income tax - it's chargeable to income tax, but you might not have really paid tax if it was only a fiver and you have plenty of dividend allowance or personal allowance.