The Lemon Fool

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/

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.

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!

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.

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

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

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.

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.

A bit early ... but I'm getting my tax return info ready and the ugly Excess Reportable Income rears its head.

https://www.vanguardinvestor.co.uk/cont ... e-2020.pdf

Best wishes,

Steve

Steveam wrote:A bit early ... but I'm getting my tax return info ready and the ugly Excess Reportable Income rears its head.

https://www.vanguardinvestor.co.uk/cont ... e-2020.pdf

Best wishes,

Steve

Thanks.

I presume we just calculate the amount (by simply multiplying the ERI in the PDF by our holding on that date(?)) and then add it to the dividend income for the year? I don't normally do a tax return - I just phone up HRMC and tell them the total of dividends received as reported on the tax certificate from my broker - I presume I can just include this in the dividends received figure that I give HMRC over the phone?

I'd completely forgotten about this. Luckily the ishares IUKD and ISF seem to be 0.00 and easy to find to confirm - they provide a link at the bottom of the information page for each of their ETFs. (e.g. "Literature" section at the bottom of the page : https://www.ishares.com/uk/individual/e ... ts/251795/ if anyone else needs it)

It looks like the vanguard (thanks for the link!) FTSE 100 distributing ETF does have a small amount.

But I'm really, really struggling to find any information for "HSBC FTSE 100 ETF (HUKX.L)"... does anyone know where they publish this information?

I'm beginning to regret buying this particular (HSBC) one ... I thought I'd try to keep my non-ISA investments in simple tracker ETFs paying GBP dividends to try to avoid any tax hassles other than just reporting the simple dividends received with no need to worry about currency conversions, etc. And then figured I'd split my holdings amongst different FTSE100 ETFs so that I could just sell the whole holding of one of them to transfer into an ISA each new tax year, without even needing to worry about partial capital gains tax calculations - the calculations are far easier when you just sell all your holding in one go. But I completely forgot about ERI when I chose this one, and now I can't seem to find any ERI information about it. Arggghh.

Why on earth isn't this included in the tax certificate from stock brokers. And more to the point these days, why isn't this automatically sent to HMRC by the stock broker? (Largely a rhetorical question; though I'd be delighted if someone could tell me that actually it is include and sent automatically now! But in the absence of that, my real question is where on earth can I find the HSBC ETF information?)

Thanks.

Many ETFs post their excess reportable income here: https://www.kpmgreportingfunds.co.uk/Ho ... icInvestor . It's free to sign up. It says, for
HSBC FTSE 100 UCITS ETF GBP Distribution:

Reporting period Start: 01/01/2019 End: 31/12/2019
Excess reported income per unit 0.0000
Fund Distribution Date 30/06/2020

Thank you very much Steve. I could easily have forgotten about that, despite being the OP last year. What a rotten system.

The amounts are so trivial that for most people's returns they will be no more than a rounding error and given that even a large broker like HL doesn't mention it to clients on their tax certificate, I think it is unlikely in the extreme that HMRC would do anything at all if the taxpayer omits it.

scrumpyjack wrote:The amounts are so trivial that for most people's returns they will be no more than a rounding error and given that even a large broker like HL doesn't mention it to clients on their tax certificate, I think it is unlikely in the extreme that HMRC would do anything at all if the taxpayer omits it.

HL does not have to report Excess Reportable Income. I have just worked out the numbers for 829 VFEM, which was worth about £43K when I last looked. The Excess Reportable Income is $0.0812*829/1.36296 $/£ = £49.39. (Do not forget to convert dollars to pounds.) I expect that some of the people here will have much larger unsheltered ETF holdings. I would like to move that holding into my ISA, but that will take time, and may not happen at all.

You can add the Excess Reportable income to the base cost of your shares:

https://www.gov.uk/hmrc-internal-manual ... s/ifm13373

My ERI will be about £300 this year - certainly not trivial in my case.

Even if it were trivial why not get it right? Some years ago I had a tax enquiry and the whole thing went away with no hassle (despite a minor error on my part) and I’m convinced this was because HMRC just got a good sense that everything was in good order. (This is in contrast to one of my acquaintances who has had an enquiry turn into an investigation and been fined etc).

Thanks for the link about the base costs issue (it’s an irritant as one has to keep records to adjust the base costs).

Best wishes,

Steve