Investing in US Market Shares Berkshire Hathaway

dales1

... but once you have done ERI correctly for the first time, then it's an easy process to replicate ever after !

Just ask the forum if necessary.

It isn't difficult, just a bit of admin once a year.

The Monevator guide (as linked above) is great.

wmb194

People shake in their boots over ERI but, as dales1 says, once you're aware of it it isn't so bad. Working through it for my 2024/25 tax return most of the ETFs I owned in that period had zero ERI and those that did added up to bobbins so even missing them wouldn't have worried HMRC much (if it had ever noticed).

The free to register and use KPMG database is a useful resource and covers many ETFs and their ERI reporting:

https://www.kpmgreportingfunds.co.uk/

GeoffTF

I held VFEM for many years. There were several instances where the ERI was more than 0.1% of the capital value. The ERI would have been more than £100 for a £100K holding. You cannot assume that it will be negligible without collecting the data and doing the calculation, in which case you might as well be an honest man and declare it. Even if HMRC does not think that is worth chasing a small amount of undeclared income, they may start looking at your tax returns for other instances of non-compliance.

wmb194

GeoffTF said:

I held VFEM for many years. There were several instances where the ERI was more than 0.1% of the capital value. The ERI would have been more than £100 for a £100K holding. You cannot assume that it will be negligible without collecting the data and doing the calculation, in which case you might as well be an honest man and declare it. Even if HMRC does not think that is worth chasing a small amount of undeclared income, they may start looking at your tax returns for other instances of non-compliance.

Sure but my point is that it has a tendency to be trivial and not worth getting in a tizzy over. In the wider context of a normal person's tax return a missed £100 is nothing and in your example 0.1% sounds like an exception and they won't have £100k invested. People must be missing these sorts of amounts all of the time.

According to KPMG's website below is the latest ERI for VFEM. Imagine my shock, it's zero. 

My overall ERI for 24/25 was 50 euro cents from a single fund. I was disappointed because that one wasn't in the KPMG database, it took me ages to find and it doesn't even amount to a pound.

GeoffTF

TheTelltaleChart said:

In conclusion, detailed research proves that ERI is trivial.

Unless it is not. The ERI will almost certainly be small for a small holding in a distributing ETF. It almost certainly will not be small even for a small holding in an accumulating ETF. The are no UK domiciled ETFs. I would recommend submitting a correct tax return.

GeoffTF

TheTelltaleChart said:

GeoffTF said:

TheTelltaleChart said:

In conclusion, detailed research proves that ERI is trivial.

Unless it is not.

Yeah, there was some poorly signposted irony in my comment.

The amount of ERI may not be trivial, but looking it up and including on your tax return is trivial — after you've gone to the trouble of grasping how this arcane facet of tax law works, and looked up the data on some website each year. Which isn't trivial. At least, unless your time is unimportant. And some people will find it harder than others to understand how to do this correctly. The arithmetic involved is genuinely trivial, at least.

Why not avoid all this by sticking to UK funds?

I agree that working out ERI is not difficult for a numerate person in full charge of their faculties. The tax reporting for UK funds is simpler, but many people cannot do that themselves either.

For small investor, the ERI for distributing ETFs will usually be small enough not to attract HMRC's wrath even if you make a mistake. Small investors can usually avoid the problem by using ISAs, pensions or other legal tax avoidance measures.

If you are a large investor who cannot shelter your investments, even tiny percentage ERIs can amount to significant amounts of money. If HMRC considers you to be wealthy, your affairs will also be subject to additional scrutiny.

UK funds attract exorbitant percentage platform fees on most platforms, whereas ETFs do not. The number of platforms that do not charge percentage fees for holding UK funds has been steadily decreasing.

InvesterJones

GeoffTF said:

TheTelltaleChart said:

GeoffTF said:

TheTelltaleChart said:

In conclusion, detailed research proves that ERI is trivial.

Unless it is not.

Yeah, there was some poorly signposted irony in my comment.

The amount of ERI may not be trivial, but looking it up and including on your tax return is trivial — after you've gone to the trouble of grasping how this arcane facet of tax law works, and looked up the data on some website each year. Which isn't trivial. At least, unless your time is unimportant. And some people will find it harder than others to understand how to do this correctly. The arithmetic involved is genuinely trivial, at least.

Why not avoid all this by sticking to UK funds?

UK funds attract exorbitant percentage platform fees on most platforms, whereas ETFs do not. The number of platforms that do not charge percentage fees for holding UK funds has been steadily decreasing.

Let's hope iWeb doesn't change in the near future

There are also UK Investment trusts, which some platforms treat like ETFs rather than OEIC/UTs, though they tend to be more expensive than simple ETFs.