ETF's and taxes

bowlhead99

Adyinvestment said:

One last thing (I hope) - are all ETF's & OEIC's classed as CGT and not as regular income?

If you sell shares in a company or ETF or OEIC for more than you pay for it, that is a capital gain, so the only income exposure is to your share of their annual income whether they distribute it to you or accumulate it.

The exception to this is if it is a non UK domiciled fund (e.g. an Irish or Luxembourg ETF) which refuses to register with HMRC and provide information about its undistributed income, then all the gains are taxed as income.  All the UK OEICs will be fine to be classed as CGT when you make gains on them (apart from the dividends or deemed dividends from them which are income);  mainstream London Stock exchange traded ETFs will generally also be cooperative in that regard while some listed on markets further afield (e.g. USA) may not be registered as reporting funds so are generally best avoided.

Adyinvestment

I think I have got it now

Peter314

bowlhead99 said:

Adyinvestment said:

One last thing (I hope) - are all ETF's & OEIC's classed as CGT and not as regular income?

If you sell shares in a company or ETF or OEIC for more than you pay for it, that is a capital gain, so the only income exposure is to your share of their annual income whether they distribute it to you or accumulate it.

I was contemplating investing in Polar Capital Technology Trust (PCT) as a vehicle for speculative capital gains without dividends. https://www.polarcapitaltechnologytrust.co.uk/default.aspx
Will this achieve the aim, or would notional dividends from the underlying investments count as declarable dividend income?

bowlhead99

Peter314 said:

bowlhead99 said:

Adyinvestment said:

One last thing (I hope) - are all ETF's & OEIC's classed as CGT and not as regular income?

If you sell shares in a company or ETF or OEIC for more than you pay for it, that is a capital gain, so the only income exposure is to your share of their annual income whether they distribute it to you or accumulate it.

I was contemplating investing in Polar Capital Technology Trust (PCT) as a vehicle for speculative capital gains without dividends. https://www.polarcapitaltechnologytrust.co.uk/default.aspx
Will this achieve the aim, or would notional dividends from the underlying investments count as declarable dividend income?

PCT has special status as an 'investment trust' and as long as it meets the HMRC requirement of paying out to investors at least 85% of its net income as dividends, it keeps the status and gets decent tax treatment on its own remaining internal profits.  For entities like that, you don't need to consider any 'notional' income as an investor - whatever they pay you as dividend is income for you and whatever they don't, is not.    In PCT's case, they make X million of dividend or interest income a year from their investments but their running costs are higher than that, so they can say that they have met the criteria of paying out the minimum amount of net income required - it just happens to be £nil.

If they get bigger and income goes higher than costs then potentially there may be divs in the future. But for now the type of gains you would get would be capital gains. Or, capital losses of course if it goes down and you decide to sell.

Peter314

Thank you BH - detailed and helpful as ever 👍