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Vanguard Excess Reportable Income

Index tracking funds and ETFs
GeoffF100
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Vanguard Excess Reportable Income

#319924

Postby GeoffF100 » June 20th, 2020, 8:00 am

Vanguard has published the excess reportable income numbers for the last tax year:

https://www.vanguardinvestor.co.uk/inve ... nformation

If you held any of these funds in a taxed account on the last day of the Account Period, you will need to report the excess reportable income on your tax return:

https://monevator.com/excess-reportable-income/

1nvest
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Re: Vanguard Excess Reportable Income

#325399

Postby 1nvest » July 11th, 2020, 2:40 pm

From that monevator link
Full equalisation funds enable you to deduct an amount per share from your excess reported income or distribution obligations, so that you’re not taxed on income you didn’t benefit from in the first place but actually had to expend capital on.

I haven’t found any index trackers that operate full equalisation.

Is it that only those holding the fund at the Ex-date bear the full amount of Excess Reportable Income (ERI)?

Seems like it should be proportioned. If I hold fund X for all but the Ex-Date, then its then down to someone else to bear/declare the ERI. Fairer would be if I declared 364/365th's of the ERI and the new holder declares 1/365th. But it doesn't seem to be set that way.

scrumpyjack
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Re: Vanguard Excess Reportable Income

#325402

Postby scrumpyjack » July 11th, 2020, 2:59 pm

Surely the point is that there isn't an ex-div date. It is income that they never distributed!
The amount should be added to your acquisition cost for CGT purposes, just to add to the complications!

1nvest
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Re: Vanguard Excess Reportable Income

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Postby 1nvest » July 11th, 2020, 3:59 pm

scrumpyjack wrote:Surely the point is that there isn't an ex-div date. It is income that they never distributed!
The amount should be added to your acquisition cost for CGT purposes, just to add to the complications!

But there is a date associated with the ERI value - as though it had been paid out on that date and can be taxed as income. As you say where you should offset that by increasing the acquisition cost so you don't also end up paying CGT as well. For a holder who sold just prior to the ERI date, then they don't make adjustment to the acquisition cost as they weren't holding the fund at the ERI date, nor do they declare it. When equalisation is relevant, then its different, where you proportion the ERI according to the proportion of time you held the holding. At least that's my understanding.

jonesa1
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Re: Vanguard Excess Reportable Income

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Postby jonesa1 » July 11th, 2020, 7:09 pm

Does this apply only to accumulation shares, or is there an element of excess reportable income even for distributing ETFs?

scrumpyjack
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Re: Vanguard Excess Reportable Income

#325476

Postby scrumpyjack » July 11th, 2020, 7:42 pm

:cry:
jonesa1 wrote:Does this apply only to accumulation shares, or is there an element of excess reportable income even for distributing ETFs?



It applies to distributing funds also, though usually the amounts are trivial

GeoffF100
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Re: Vanguard Excess Reportable Income

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Postby GeoffF100 » July 12th, 2020, 7:45 am

jonesa1 wrote:Does this apply only to accumulation shares, or is there an element of excess reportable income even for distributing ETFs?

Yes. ETFs do not necessarily pay all their income (as calculated by HMRC rules) as a dividend. This income is nonetheless taxable as income for overseas funds. (It would not be taxable as income for a UK based fund, but would increase the capital value of the fund and could eventually be taxed as a capital gain.) The ETFs I hold did not have any excess reportable income for the last two years, but do this year. I had been hoping that would not happen.

Alaric
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Re: Vanguard Excess Reportable Income

#325571

Postby Alaric » July 12th, 2020, 11:04 am

GeoffF100 wrote:The ETFs I hold did not have any excess reportable income for the last two years, but do this year. I had been hoping that would not happen.


It probably says that if you have a choice and want to minimise the amount of attention you need to pay to tax returns, ETFs should be held in ISAs or SIPPs in preference to taxed accounts.

Unlike dividends, there doesn't appear to be a legal requirement for platforms or registrars to notify holders of the amounts.


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