ETFs - what the tax situation?

[LenomDrizzle]

Hi there

Hoping you can help with my query.

I think I've read that ETFs carry an additional tax implication, if the ETF is based outside of the UK.

Is this correct, or am I just liable for any capital gains tax arising out of any such holding?

I only hold a very modest amount of ETFs, approximately £400 as part of my shares portfolio, and about £30 of profit to date.

Much appreciated,

LD

[EthicsGradient]

It's probably about ERI - Excess Reportable Income (or, sometimes, "Reported"). Assuming the ETF has UK Reporting Status (most traded on the LSE do), then, for each of their financial years (you have to look that up for each ETF), they have to report any income that has not been distributed to holders. That might be small, or zero, for an ETF that is called "distributing"/"income" etc., or if might be substantial for an accumulating one. 6 months after the end of their financial year, you treat it as income for tax purposes. Some ETF managers report this on their own websites, some at https://www.kpmgreportingfunds.co.uk/ (free sign-up). Some platforms may even work it out for you, but don't count on that.

https://www.justetf.com/uk/news/passive ... he-uk.html

[kempiejon]

Welcome LD to the boards.
Do you have other investments? If UK resident you'll probably have an allowance for income and gains on your investments and with £400 of ETFs no real risk in exceeding them just yet, especially as the tax year end if just a spit away. It is worth understanding sheltering your investments from tax and what liabilities are due if you don't.
You've had a pointer on ERI too.

[Urbandreamer]

As I understand things, you may be asking the wrong question.

The "tax" situation that you personally will mostly experience depends upon how you buy and keep said ETF.
I.E GDA (general dealing account), ISA, SIPP etc.

However there are other taxes. For example you may pay UK stamp duty trading a UK listed ETF. Or US stamp duty upon one listed in the USA. These things are essentially treated as investment companies, so pay tax in the UK or Guernsey etc.

You also may have to fill in forms to comply with tax treaties like the W8-BEN (if US).

Are you trying to ask if there are tax downsides in buying one other another?

TBH I think that it's one of these things where do your own research is vary important. For example I own VWRL, and my big ongoing expense is going to be FX fees on the distribution. But that isn't a tax is it?

Ps, please don't look into the downsides of holding the likes of Nestle. I know enough that I wouldn't touch it with a barge pole, despite the fact that it's obviously a great company.

[LenomDrizzle]

Thanks both - yes, I'm a UK resident and in terms of other investments, nothing major other than a small chunk in shares and another small chunk in an ISA. I'm familiar with tax wrappers but am speculating a bit on stocks and shares given the small amounts I have invested at the moment and small chance of any CG tax implications. But wanted to know if there were any other tax implications.

One of the ETFs I'm invested in, Sprott Physical Uranium Trust is listed as a "reported offshore fund" with HM Revenue and Customs.

Trust this helps explains the position.

Many thanks
LD

[Alaric]

Trust this helps explains the position.

The headache with ERI (excess reportable income) is that unlike dividends and interest, Brokers aren't required to tell you what it is.

[DrFfybes]

Thanks both - yes, I'm a UK resident and in terms of other investments, nothing major other than a small chunk in shares and another small chunk in an ISA. I'm familiar with tax wrappers ...

Are you completely familiar with them?

I only ask as it sounds like "another small chunk" implies that you might have space in your allowance for the year. I am always surprised how many people I know save their cash in an ISA but leave their equities unsheltered. They know the theory but because they start small, often using an App, by the time they realise it is an issue it's all got very complicated.

Another option is that if you have some simple shares in the ISA and ETFs outside, then sell them and swap them over.

Paul

[Lootman]

there are other taxes. For example you may pay UK stamp duty trading a UK listed ETF. Or US stamp duty upon one listed in the USA. These things are essentially treated as investment companies, so pay tax in the UK or Guernsey etc.

UK listed ETFs are usually domiciled in Ireland and there is no stamp duty on purchases.

I was not aware that the US had any form of stamp duty. Do you have a link for that?

[Urbandreamer]

there are other taxes. For example you may pay UK stamp duty trading a UK listed ETF. Or US stamp duty upon one listed in the USA. These things are essentially treated as investment companies, so pay tax in the UK or Guernsey etc.

UK listed ETFs are usually domiciled in Ireland and there is no stamp duty on purchases.

I was not aware that the US had any form of stamp duty. Do you have a link for that?

I could be wrong. My point really was that we can't generalize without more knowledge of the specifics. We didn't even know that the OP was talking about a Canadian ETF at the time of my post. Hence why I guessed wrong about the jurisdiction of the ETF that they wanted help upon. We couldn't guess upon tax treaties as they differ from country to country. Or purchase taxes (stamp duty), the Swiss pay it on ETF's.

[LenomDrizzle]

Thanks everyone for your input. Think I'll do a bit more research and take it from there

[Nikosven]

Thanks for sharing