Investing in US Market Shares Berkshire Hathaway

Pat38493

I am thinking of making an investment of initially about £10K in Berkshire Hathaway class B shares in a Trading 212 Investment account (GIA).

Part of the motivation for this is to be able to use/control my capital gains tax allowance whilst I have more money than I can get into ISAS but I don't want to keep all of it in cash, and to reduce exposure to savings tax.

All my investing so far was in items that were in UK or Ireland, so I just want to check my understanding here.  Are my assumptions here correct and/or does anyone have any additional points or corrections:

- I need to move some of my GBP cash into USD in my T212 account, and then I can buy the shares as they are quoted on the US stock exchange?

- As I am not a US taxpayer, I don't have to pay any US tax or declare anything in the US?

- Since Berkshire Hathaway doesn't pay dividends (or at least never did in the past), I don't have to care about dividends allowances or tax for this particular investment.

- If the shares go down in value, I don't have any action to take regarding tax.

- If the shares goes up in value but by 3K or less, I can sell them all and keep the profits without having to declare a tax return (assuming no other capital gains on other investments or items).

- If I bought the shares all in one transaction and sold them all in one transaction I can just take the difference as the capital gain (or do I need to make some kind of FX/currency calculation?).

- If I hold anything else in the GIA like for example VWRP, I need to add up any capital gains or losses from the tax year to find out if I have any tax liability.

- If there turns out to be any actual CGT payable, I need to tell HMRC that I have to fill in a tax return?

gravel_2

You don't need to convert GBP to USD. T212 will quote you in £ and when you go to review your order you will see the FX rate and FX fee.

InvesterJones

I think there's a form you'll have to fill in regardless to tell the US that you won't be paying them anything, just in case a dividend is made.

Correct about the 3K profit at this year's allowances - if you exceed this I'm not sure you have to fill in a complete tax return, there might be an option to simply declare it in your personal tax account online. Correct that other investments count towards this limit. Given complexity with equalisation it might be useful to use a platform that provides a nice breakdown for you at the end of the tax year.

Investing in stocks in GIA makes sense if you are wanting to increase your equities holding beyond your ISA/SIPP allowances (you haven't forgotten about pensions have you?) - but if it's purely to avoid tax/cash then there are some other options like gilts that might be worth considering (though again, they should be considered on own merits rather than purely their tax advantages).

bobfredbob

Trading 212 has an electronic form that it made me sign when I joined up for the US tax.

Although you're investing 10k, I remember reading that anything in total over $60k is considered "U.S. situs assets" and could be subject to their death taxes.   I only mention it since you mentioned about other investments.  We have some sort of agreement with the US so I never looked in to it since Irish ETFs were exempt from all that.  Perhaps someone knows a lot more about that for future reference.

My limited experimentation on Trading 212 (with a free dollar-denominated stock) is that the CSV trade documents it produces gives you the number of shares, its value in dollars, the conversion rate to GBP, the final GBP converted value, and the FX fee that was paid.

I expect that these figures are acceptable to HMRC for calculating CGT, and you don't need to dig out official exchange rates for the date of the transaction.  My understanding is that you can't claim the FX fee against CGT fees.

TheTelltaleChart

Why, though? Tax tails and dogs spring to mind. Is investing in individual shares usually part of your approach? In any case, BH might start paying a dividend at some point, as things move on after WB's retirement.

To keep tax on unwrapped investments simple, I'd generally start with income units in a UK-domiciled OEIC or unit trust. (Since there are tax complications with holding non-UK funds or ETFs.) Or an investment trust (but that will have higher charges than a cheap tracker fund).

GazzaBloom

Instead of putting cash into a GIA have you considered increasing your pension contributions first? Or are you maxed out on the £60K allowance?

It's a far more efficient way to save/invest, especially if via salary sacrifice and you employer pays in their NI savings.

k12479

TheTelltaleChart said:

Why, though? Tax tails and dogs spring to mind. Is investing in individual shares usually part of your approach? In any case, BH might start paying a dividend at some point, as things move on after WB's retirement.

To keep tax on unwrapped investments simple, I'd generally start with income units in a UK-domiciled OEIC or unit trust. (Since there are tax complications with holding non-UK funds or ETFs.) Or an investment trust (but that will have higher charges than a cheap tracker fund).

Section 899 also springs to mind.

Pat38493

TheTelltaleChart said:

Why, though? Tax tails and dogs spring to mind. Is investing in individual shares usually part of your approach? In any case, BH might start paying a dividend at some point, as things move on after WB's retirement.

To keep tax on unwrapped investments simple, I'd generally start with income units in a UK-domiciled OEIC or unit trust. (Since there are tax complications with holding non-UK funds or ETFs.) Or an investment trust (but that will have higher charges than a cheap tracker fund).

After looking into this some more I will probably do this and just use UK tracker ETF with distributions.  The reason for Berkshire Hathaway was because I see it more like a “fund” than a company in itself.  For the next 1-2 years we are stuck with a significant amount outside of tax wrappers but this will go down to zero within 2 years.  Also we have £600K sitting around using up our savings allowances very fast pending a house purchase which might take another month or two, so our savings allowances will be maxed out this year.

Therefore this is more along the lines of - since I have to pay tax anyway I might as well try to use the CGT and dividend allowances (obviously also adding some level of risk but given my drawdown strategy, it’s fine to have this amount of money invested outside of pension/ISA anyway).

GazzaBloom said:

Instead of putting cash into a GIA have you considered increasing your pension contributions first? Or are you maxed out on the £60K allowance?

It's a far more efficient way to save/invest, especially if via salary sacrifice and you employer pays in their NI savings.

I am sort of maxed out in the sense that I have taken a couple of significant tax free cash withdrawals and I have calculated a limit for avoiding recycling (although these things are a bit of a grey area).

Hoenir

Pat38493 said:

TheTelltaleChart said:

Why, though? Tax tails and dogs spring to mind. Is investing in individual shares usually part of your approach? In any case, BH might start paying a dividend at some point, as things move on after WB's retirement.

To keep tax on unwrapped investments simple, I'd generally start with income units in a UK-domiciled OEIC or unit trust. (Since there are tax complications with holding non-UK funds or ETFs.) Or an investment trust (but that will have higher charges than a cheap tracker fund).

The reason for Berkshire Hathaway was because I see it more like a “fund” than a company in itself.  

At it's core it's an insurance company. 

GazzaBloom

I note the market sentiment is dwindling since Buffet announced he is stepping down at the end of the year. 

In the long run fundamentals will determine the share price but short term there may be some volatility across the changeover period from Buffet to Greg Abel who doesn't have the public persona and almost deity like aura that Buffet carries.

If you believe Abel will steer the ship well then a drop in price may be a good time to buy for a long term hold thereafter.

Pat38493

GazzaBloom said:

I note the market sentiment is dwindling since Buffet announced he is stepping down at the end of the year. 

In the long run fundamentals will determine the share price but short term there may be some volatility across the changeover period from Buffet to Greg Abel who doesn't have the public persona and almost deity like aura that Buffet carries.

If you believe Abel will steer the ship well then a drop in price may be a good time to buy for a long term hold thereafter.

Yes - well the other thing I figured out in the meantime is that Trading 212 will charge me about £15 FX conversion fee to buy the shares, and presumably the same again if I sell them and want to convert back to GBP.  For the size of holding I was initially considering I changed my mind and I have just shoved it all into VWRL.