The Lemon Fool

I've been looking at these and, correct me if I'm wrong, they can be invested in outwith the ISA wrapper, but they all fall foul of Excess Reportable Income taxation, which is a little bit of a pain for a simple investor like me.

From what I read, it is foreign based ETF's that are subject to this tax (all are generally in based in Ireland).

So my question: Are there any UK based Global ETF's along the lines of HMWO, VWRL, VHYL and so on that don't have this requirement?

I can't find any!

https://www.justetf.com/uk/find-etf.html

There is a fund filter for "domicile" but there is no listing for UK..just foreign countries (Bulgaria, France, Ireland, Jersey, Luxembourg & Netherlands).

Tedx wrote:I've been looking at these and, correct me if I'm wrong, they can be invested in outwith the ISA wrapper, but they all fall foul of Excess Reportable Income taxation, which is a little bit of a pain for a simple investor like me.

If you hold Income units, the amounts should be de minimis.

It would be a worthwile tax simplification to do one of two things.

Abolish it for Income units on the grounds that the income not distributed is rolled up into the price.
Alternatively pass legislation that forces funds and platforms to report amounts to individual investors that parallel the statements of dividends by tax year that are already required. Failure to do either isn't making tax digital, just making tax difficult for mostly trivial anounts.

Just don't hold ETFs outside of an ISA or SIPP.

For my non-ISA/non SIPP holdings, I have found investments trusts that are pretty much tracker funds (albeit slightly more expensive than the equivalent ETF)

FTSE 100 - CTY
S&P 500 - JAM
Developed World - FCIT

They aren't perfect index trackers but haven't been too far off in the past.

absolutezero wrote:Just don't hold ETFs outside of an ISA or SIPP.

For my non-ISA/non SIPP holdings, I have found investments trusts that are pretty much tracker funds (albeit slightly more expensive than the equivalent ETF)

FTSE 100 - CTY
S&P 500 - JAM
Developed World - FCIT

They aren't perfect index trackers but haven't been too far off in the past.

Pretty much what I'm doing at the moment.

If your platform doesn't charge a percentage fee on funds, then there are ones with OCFs comparable to the lowest ETFs, eg Fidelity Index World Fund at 0.12%. These have lower ongoing charges than investment trusts, and don't attract 0.5% stamp duty when bought, and will usually be UK domiciled (the Fidelity one is), so won't have ERI to worry about.

https://www.ajbell.co.uk/research-tools/quickrank/fund can be used to look for them, and order by ongoing charges.

EthicsGradient wrote:If your platform doesn't charge a percentage fee on funds, then there are ones with OCFs comparable to the lowest ETFs, eg Fidelity Index World Fund at 0.12%. These have lower ongoing charges than investment trusts, and don't attract 0.5% stamp duty when bought, and will usually be UK domiciled (the Fidelity one is), so won't have ERI to worry about.

https://www.ajbell.co.uk/research-tools/quickrank/fund can be used to look for them, and order by ongoing charges.

Halifax Sharebuilder doesn't allow funds unfortunately

absolutezero wrote:Just don't hold ETFs outside of an ISA or SIPP.

For my non-ISA/non SIPP holdings, I have found investments trusts that are pretty much tracker funds (albeit slightly more expensive than the equivalent ETF)

FTSE 100 - CTY
S&P 500 - JAM
Developed World - FCIT

They aren't perfect index trackers but haven't been too far off in the past.

I will need to use a GIA next tax year as I will fully utilise my ISA. I understand how captial gains and dividend tax will impact me but i am aware of ERI & equalisation which could impact ETFS if i held them?

If i went for investment trusts instead will i just be liable for captial gains and dividend tax?

Thanks

Ilikebeer wrote:If i went for investment trusts instead will i just be liable for captial gains and dividend tax?

Investment Trusts are taxed as if individual shares on the hands of the individual, so just capital gains amd dividends.

A small minority of ITs which invest in bonds and loans distribute some or all of the income as interest which puts them parallel to taxation on savings accounts. The key word to watch oot for is "streaming". Watch out for REITs as well. Despite the IT in their name, distributions are taxed in a special way, namely property income distrubutions. Most also distribute as normal equity dividends as well.

Alaric wrote:

Ilikebeer wrote:If i went for investment trusts instead will i just be liable for captial gains and dividend tax?

Investment Trusts are taxed as if individual shares on the hands of the individual, so just capital gains amd dividends.

A small minority of ITs which invest in bonds and loans distribute some or all of the income as interest which puts them parallel to taxation on savings accounts. The key word to watch oot for is "streaming". Watch out for REITs as well. Despite the IT in their name, distributions are taxed in a special way, namely property income distrubutions. Most also distribute as normal equity dividends as well.

Thanks very much for the reply.

I guess I won't need to worry about picking income units like I would have with an ETF / OIC to get around the issue with accumulation units?

It is not that difficult to work out the ERI. I certainly would not be willing to pay much higher charges to avoid it, but I guess that depends on the size of your holding. An OEIC such as HSBC All-World Index Fund C with iWeb would avoid ERI anyway. The only possible snag with that is if all the platforms start charging percentage fees to hold OEICs, or the fund manager ramps up the charges. ITs can be sold (as was Globe) or liquidated. You are potentially captive outside a tax shelter. A big Vanguard tracker is likely to be safe.

GeoffF100 wrote:It is not that difficult to work out the ERI. I certainly would not be willing to pay much higher charges to avoid it, but I guess that depends on the size of your holding. An OEIC such as HSBC All-World Index Fund C with iWeb would avoid ERI anyway. The only possible snag with that is if all the platforms start charging percentage fees to hold OEICs, or the fund manager ramps up the charges. ITs can be sold (as was Globe) or liquidated. You are potentially captive outside a tax shelter. A big Vanguard tracker is likely to be safe.

OEICs can be liquidated too. Franklin Templeton did it to me, just because they decided they weren't making enough money running it, as far as I can tell. Which meant, since it was outside a tax sheltered account, I had to sell some things I held at a loss to avoid a CGT bill. At least an IT means the shareholders get a vote before such a drastic move.

EthicsGradient wrote:

GeoffF100 wrote:It is not that difficult to work out the ERI. I certainly would not be willing to pay much higher charges to avoid it, but I guess that depends on the size of your holding. An OEIC such as HSBC All-World Index Fund C with iWeb would avoid ERI anyway. The only possible snag with that is if all the platforms start charging percentage fees to hold OEICs, or the fund manager ramps up the charges. ITs can be sold (as was Globe) or liquidated. You are potentially captive outside a tax shelter. A big Vanguard tracker is likely to be safe.

OEICs can be liquidated too. Franklin Templeton did it to me, just because they decided they weren't making enough money running it, as far as I can tell. Which meant, since it was outside a tax sheltered account, I had to sell some things I held at a loss to avoid a CGT bill. At least an IT means the shareholders get a vote before such a drastic move.

My only unsheltered fund is Vanguard Developed World ex UK which I believe should be safe. Vanguard's factor ETFs were liquidated, but they had very few takers and were uneconomic.

Ilikebeer wrote:
I guess I won't need to worry about picking income units like I would have with an ETF / OIC to get around the issue with accumulation units?

Most Investment Trusts have only one class of share, so you get the dividends. Like many Companies, it may be possible to elect for a dividend reinvestment plan.

There are or used to be "Split Capital Investment Trusts". These are no longer on offer, following problems where some ran out of assets and failed.

https://en.wikipedia.org/wiki/Split_cap ... ment_trust

Interactive Investors Super60 https://media-prod.ii.co.uk/s3fs-public/pdfs/S_60_Jan_24.pdf includes this iShares global tracker ETF (SWDA)
https://www.ii.co.uk/etfs/ishares-core-msci-world-etf-usd-acc-gbp/LSE:SWDA This can be held in a general trading account as well as an ISA,JISA or SIPP.

It was the 3rd highest selling ETF on the ii platform in March 2024, behind 2 Vanguard S&P500 trackers (VUSA and VUAG)
https://www.ii.co.uk/analysis-commentary/top-10-most-purchased-etfs-march-2024-ii531247