Excess Reportable Income

dales1

Yes, you must add the ERI to your dividends for the year.

The ERI amount, is the ERI (per the Vanguard 2020 tax report) multiplied by of the number of shares held at 30.6.20. This is deemed to be received on 31.12.20 (so you would use the FX for that day, or your normal practice). That's where your six months comes in.

Yes, you add the same amount of ERI on 31.12 20 as an expense (just like platform commission) to your running total of pool of purchase costs for that share for CGT purposes. This reduces your ongoing CGT exposure.

It is ridiculous that funds or platforms don't seem to show these figures at all (of those that I use anyway).

It leaves the uninitiated in peril of misreporting their dues.

underground99

talexuser said:

Ridiculous that funds or platforms have no requirement to show it on your end of year return.

dales1 said:

It is ridiculous that funds or platforms don't seem to show these figures at all (of those that I use anyway).

It leaves the uninitiated in peril of misreporting their dues.

If you buy an OEIC, the platform is an intermediary in the chain of ownership, basically acting as a distribution agent to get the fund units into your hands, handling subscriptions and redemption requests for the fund manager. They are hooked into the fund reporting and get all the 'equalisation' and 'accumulated distribution' info to be able to give you a consolidated tax statement each year which summarises not just the income you physically received from funds and shares held on their platform but also the notional distributions on the OEICs.

However, they don't play the same role for ETFs, where they are just acting to broker a transaction for you to acquire some shares on the secondary market (the stock exchange).  If they receive some dividend proceeds on your behalf, they will credit it to your account, and if there was a consolidation or share split they would be informed of that corporate action and update the quantity of shares they hold for you.  They can do that whether what they bought for you on the stock exchange was a share of Tesco plc or McDonalds Corp, or an iShares or Vanguard ETF. But otherwise they just sit back and are none the wiser about the detailed accounting going on within the books of the ETF or the supermarket group or the restaurant group or whatever you bought shares in. They are not plumbed in to the ETF's accounting and administration.

Although your stockbroker / investment platform can help you buy a share of an ETF or Tesco or Mcdonalds and hold it for you, there's no obligation on your stockbroker to go and find out how much money the ETF made and didn't distribute by way of dividend, just like there is no obligation for him to keep you informed about how much profit Tesco or McDonalds made and didn't distribute.

The ETFs have registered under HMRC's offshore funds regime as reporting funds which means they commit to make available the information about what excess income they generated and chose not to distribute. The ETF providers publish that in reports on their own websites, so anyone who held shares at the deemed distribution date and needs the information can find it out. 

EthicsGradient

The ETF providers publish that in reports on their own websites, so anyone who held shares at the deemed distribution date and needs the information can find it out. 

Some publish it on their websites; some, as far as I can tell (eg Lyxor) only publish it on the KPMG website - and they do not tell people that on their websites. It's only sites like this and Monevator that let people know about it. I suspect there are a lot of people who do not know this is something they should be declaring as income and using in capital gains calculations, if held outside ISAs/SIPPs.

underground99

EthicsGradient said:

The ETF providers publish that in reports on their own websites, so anyone who held shares at the deemed distribution date and needs the information can find it out. 

Some publish it on their websites; some, as far as I can tell (eg Lyxor) only publish it on the KPMG website - and they do not tell people that on their websites. It's only sites like this and Monevator that let people know about it. I suspect there are a lot of people who do not know this is something they should be declaring as income and using in capital gains calculations, if held outside ISAs/SIPPs.

Lyxor do publish (from Home / Resources / , the UKRFS Reports have the UK 'reporting fund status' information) but looking at the dates, the reports found there generally seem to be quite delayed compared to what you would want.

As an ETF in e.g. Luxembourg or France may cater to investors from tens of countries across Europe, it is not really their responsibility to tell you how tax works in your country of residence and there is usually a lot of disclaimer about personal circumstances.  Presumably if you called them up asking where to find the report data they could tell you, but I don't think the onus is on them to tell you that you need it. ETFs can be complex products and when you buy a foreign domiciled product it is up to you to understand how you are taxed on such products.

Investors buying them on a DIY basis through an execution-only broker should know what they are getting into. Of course, they don't all.

There's plenty of naivety among punters in the savings and investment world.  I remember when UK banks stopped deducting tax at source, some people in a higher rate bracket seemed quite surprised that they would have to carefully check their interest income and make sure they paid the right amount of tax if it was over the £500 allowance, as if they had never needed to worry about paying tax on interest income in the past 'because bank interest was paid net of tax'.

talexuser

Nevertheless it is needlessly complicated for the small investor if the information has to be hunted down and a simple google search does not give an easy step by step example without recourse to specialist forums (which I doubt the vast majority of taxpayers have ever heard of). The sums may add up for billionaires, but the system should be easy for the layman to understand how taxes work for the majority of 'ordinary' taxpayers.  

EthicsGradient

underground99 said:

EthicsGradient said:

The ETF providers publish that in reports on their own websites, so anyone who held shares at the deemed distribution date and needs the information can find it out. 

Some publish it on their websites; some, as far as I can tell (eg Lyxor) only publish it on the KPMG website - and they do not tell people that on their websites. It's only sites like this and Monevator that let people know about it. I suspect there are a lot of people who do not know this is something they should be declaring as income and using in capital gains calculations, if held outside ISAs/SIPPs.

Lyxor do publish (from Home / Resources / , the UKRFS Reports have the UK 'reporting fund status' information) but looking at the dates, the reports found there generally seem to be quite delayed compared to what you would want.

As an ETF in e.g. Luxembourg or France may cater to investors from tens of countries across Europe, it is not really their responsibility to tell you how tax works in your country of residence and there is usually a lot of disclaimer about personal circumstances.  Presumably if you called them up asking where to find the report data they could tell you, but I don't think the onus is on them to tell you that you need it. ETFs can be complex products and when you buy a foreign domiciled product it is up to you to understand how you are taxed on such products.

Investors buying them on a DIY basis through an execution-only broker should know what they are getting into. Of course, they don't all.

There's plenty of naivety among punters in the savings and investment world.  I remember when UK banks stopped deducting tax at source, some people in a higher rate bracket seemed quite surprised that they would have to carefully check their interest income and make sure they paid the right amount of tax if it was over the £500 allowance, as if they had never needed to worry about paying tax on interest income in the past 'because bank interest was paid net of tax'.

'Quite delayed' being 3 years old, and thus no good for someone who already had to complete a 2019-2020 tax return. And many of their ETFs don't appear in that list anyway. It's not so much that they don't tell you that you need to report it; it's that they don't tell you the necessary figures on their own site, and don't suggest the KPMG one.