Tax - GIA and ISA - withholding , Excess Income.. Mega matrix

Alexland

ChilliBob said:

Is it that much more complicated if you choose an accumulating fund which simply reinvests the dividends?

You will need to consider the reported accumulated income each year (ok this is not much harder than if you had received the income) but when you sell your capital gain will be based on the sale price minus your historic records of the notional distributions against those units. Could become painful if you have a variety of investments and various trade points affecting the unit quantity to consider.

ChilliBob

Okay, (I think) that makes sense.. 

So consider if the portfolio held only one fund.. 
1. Would the platform not keep a record of the accumulated and re-invested dividends? - I'd have thought even iWeb would do that? (But obviously I can't know that for sure). If not I suppose you'd need to hunt around for the dividends each year and make sure you trace back the dividend re-investment.
2. If you want to sell, then I guess what you're saying is:
a. Purchase price was 200p, sale price was 300p, three years later. Perhaps there was a 10p dividend each year, hence gain of 100p-30p = 70p. If I have understood correctly what you're suggesting.

Obviously the more funds in this GIA, and the more funds with repeated purchases the more complex this becomes - e.g. if you purchased said fund 4 times over at prices of 200p, 205p, 198p and 212p then I (think!) you'd need to take the average purchase price (204) into consideration. 

I was intending on manual record keeping in Excel for the GIA, although if platforms do a decent job this wouldn't be necessary. I'd be interested to hear your views on record keeping, and indeed if I have understood your points via my calculations

Thanks as always sir

Malthusian

ChilliBob said:

a. Purchase price was 200p, sale price was 300p, three years later. Perhaps there was a 10p dividend each year, hence gain of 100p-30p = 70p. If I have understood correctly what you're suggesting.

If the full dividends were reinvested into shares, then yes, as your purchase price is actually 230p.

In theory, a decent platform would have a CGT calculator which keeps track of the reinvestments within accumulation units. Unfortunately even decent platforms have a tendency to merge or change their underlying technology or do other things which break the CGT calculator. Or you might e.g. transfer some shares into your spouse's name and back, resulting in the CGT calculator having an incorrect purchase price. So they are not to be relied upon.

If you use income units it's much easier to go back through the transaction history and see the actual repurchases.

ChilliBob

Thanks Malthusian. 
Presumably the disadvantage of income units though is that you actually have to reinvest the dividends yourself - which not only is something you have to actually do but also something that's more expensive as dividend reinvestment automatically is typically a couple of quid vis more for just investing yourself. I appreciate in the grand scheme of things it's not a huge amount cost wise.
Either way though it seems prudent to keep your own records and not rely on a platform. 

EthicsGradient

ChilliBob said:

That suggests that Excess Reportable Income is applicable to any ETF then as opposed to ones not UK domiciled? - Which is different to my original understanding. 
I'm contacting a tax account next week to do my tax return for this year, so I'll hassle him on this matrix, but I wanted to be sure the investments I made outside a tax shelter didn't cause me grief down the line (I know about not letting the tax tail wag the investment dog and all that!).
It seems within a tax shelter (my current focus), unless you go for stuff domiciled outside the UK (or Ireland or Luxembourg) you'd not have to deal with withholding tax or excess reportable income - i.e. choosing any fund or etf suitable for an ISA is likely to mean your green lighted to not have to worry about a thing.

UK domiciled ETFs are rare - I've never come across one  (though I can find the articles about the first one launched in 2015). I would expect ERI counting as taxable income would apply for one; the concept is that it's income that hasn't been distributed, like the accumulation in the equivalent OEIC.
You don't have to worry about ERI for ETFs inside tax shelters; I couldn't say about withholding tax.

[Deleted User]

Some investment trusts have the income classified as interest and you don't pay stamp duty (from memory CMHY is one) as well as some OEICs in the 20/80 split do not have dividends but interest

Alexland

EthicsGradient said:

UK domiciled ETFs are rare

Yes the UK government thought that people should pay stamp duty so the ETF market developed elsewhere and by the time they abolished stamp duty on ETFs around 5 years ago it was too late to make any difference that boat had sailed.

ChilliBob

Hmm yeah it seems all ETFs really are not UK based. So by my calculations that means you'd need to pay tax on any dividends received and you'd need to pay tax on excess reportable income too? It also seems disposal of them would be worse too?
If I have that right then surely the choice of say something as innocent as a global equities tracker, available as both an ETF or an OEIC, commonly tracking the same index and with similar fees, surely you'd do better to use the Oeic?!