Buying shares as a regular savings plan

[Sarenco]

I'm trying to find on revenue where it says investment trusts are treated like shares for CGT and loss relief can't find it anywhere , i know most here say they are treated like shares but would like to find it in writing before diving in again and realising that Revenue haven't clear guidance on this and they will probably realease a note like they did for ETF''s and say they are gross roll-up , revenue site is a joke trying to navigate it.

Hi Fella

ITs are shares like any other and there has never been any real ambiguity as to how they should be treated for tax purposes in Ireland. They are not subject to the funds tax regime because, well, they're not funds!

One additional thing to get a handle on with ITs are the discounts/premiums to NAV at which they typically trade, whereas ETF will always trade at NAV.

 

[Fella]

Thanks Sarenco great advice as always , I've been reading a lot about trusts since yesterday I am surprised that they outperform ETF's , I've 10k in my Saxo account going into a trust now ,i'm going to slowly sell my ETF's and buy trusts. Thanks for all your help. Have you invested in these yourself?

 

[Boyd]

Thanks Sarenco great advice as always , I've been reading a lot about trusts since yesterday I am surprised that they outperform ETF's , I've 10k in my Saxo account going into a trust now ,i'm going to slowly sell my ETF's and buy trusts.

Any good reading you'd recommend on these? Im still torn between accumulating UCITS ETFs and something that doesn't require the eight year deemed disposal rule. Buying non UCITS ETFs seems like hassle, so maybe trusts is the answer....

 

[Gordon Gekko]

Hi Fella

ITs are shares like any other and there has never been any real ambiguity as to how they should be treated for tax purposes in Ireland. They are not subject to the funds tax regime because, well, they're not funds

There is actually plenty of ambiguity, and there are plenty of advisors who contend that they are funds.

Revenue's view is that some investment trusts are funds, but it is only their view.

Investment trusts typically are not funds because they are not regulated in the same manner as (say) a UCITs structure and because they are closed ended (i.e. new units are not created, the trust generally does not redeem investors' shares and in order for shares to be sold, a willing buyer must be found).

 

[Sarenco]

There is actually plenty of ambiguity, and there are plenty of advisors who contend that they are funds.

Revenue's view is that some investment trusts are funds, but it is only their view.

Investment trusts typically are not funds because they are not regulated in the same manner as (say) a UCITs structure and because they are closed ended (i.e. new units are not created, the trust generally does not redeem investors' shares and in order for shares to be sold, a willing buyer must be found).

Sorry but I strongly disagree.

Investment trusts (by which I mean fixed capital investment companies) have been taxed under the general income tax/CGT regime in Ireland for decades and I am at a complete loss as to why anybody would think this position ever changed.

I have never seen an opinion from any reputable tax adviser with any recognised expertise in this area as to why shares in an investment trust should be taxed any differently to shares in any other company. Who are these mysterious tax advisers that suggest otherwise?

We actually now have three, Irish incorporated, investment trusts (REITs are a type of investment trust) and nobody has ever suggested that shares in these companies would be taxed under the funds regime. Why would the position be any different for UK incorporated ITs?

Variable capital investment structures (whether authorised under the UCITS Regulations or any other relevant funds legislation) are specifically designated as benefiting from the tax regime applicable to authorised collective investment vehicles (where no tax is imposed at the fund level) by virtue of their authorisation. ITs enjoy no such benefit.

There really is no ambiguity - ITs are not taxed as funds simply because they are not funds.

The fact that any individual tax adviser or Revenue official mistakenly thinks otherwise doesn't change this position.

 

[Gordon Gekko]

Well, for starters there are numerous investment trusts that operate discount control mechanisms. Which means that NAV and the unit price are correlated. Which makes the investment a "material interest" for tax purposes. Revenue's own view is that if the divergence between the two is less than 5%, the investment trust is a fund.

 

[Sarenco]

That's certainly news to me - can you direct me to the relevant guidance?

ITs have been operating discount control mechanisms for a very long time - when did Revenue suddenly decide that by successfully applying such mechanisms they should be treated as funds? What about ITs that invest in assets other than publicly traded securities (where the published NAV is a guideline at best) - are they still treated as funds in these circumstances? Is the fact that they are not be treated as funds in the UK for tax purposes ignored? Or the fact that they wouldn't be treated as funds if they were incorporated in Ireland? What about ITs that do not trade at a discount to NAV or those that trade at a premium without any market intervention are they somehow treated as funds? What happens if an IT stops operating a discount control mechanism - do they somehow revert to being treated as shares?

I would suggest that argument really doesn't stand up to any degree of scrutiny.

 

[Gordon Gekko]

Sarenco

I have met with Revenue to discuss this issue and done significant work in this area. Aberdeen Asian Income is just one example of an investment trust which should probably be treated like a fund for tax purposes. It is most definitely a complex area and far from clear. For example, I am aware of one Big 4 firm who were of the view that ALL investment trusts should be taxed as funds until recently.

 

[RichInSpirit]

Points all taken on board Brendan. But I'm not swayed from my plan.

ISEQ Overall Index

25 November 2011: 2,521

Today: 6,153

Increase: 144%

I wonder if you have missed the boat?

Stop messing with complicated spreadbetting and projections which are fairly meaningless.

Just start buying shares.

Brendan

 

[Sarenco]

Sarenco

I have met with Revenue to discuss this issue and done significant work in this area. Aberdeen Asian Income is just one example of an investment trust which should probably be treated like a fund for tax purposes. It is most definitely a complex area and far from clear. For example, I am aware of one Big 4 firm who were of the view that ALL investment trusts should be taxed as funds until recently.

Are you referring to the Aberdeen Asian Income Fund Limited? That company is incorporated in Jersey and is regulated as a collective investment fund under the Collective Investment Funds (Jersey) Law 1988. Very difficult to argue that a company is not a fund when it is treated as such under the laws of its own domicile!

Would you care to name the Big 4 firm in question? I would be astonished if any Big 4 firm ever formed such an opinion but I can check this quite easily if you would care to name the firm.

 

[Fella]

Any good reading you'd recommend on these? Im still torn between accumulating UCITS ETFs and something that doesn't require the eight year deemed disposal rule. Buying non UCITS ETFs seems like hassle, so maybe trusts is the answer....

Well I currently have the MSCI world UCIT ETF thats accumulating , my intention was to sell this but I'm trying not to make impulsive decisions (for once!) Its a case of more money = more problems.

I bought all of my MSCI world at almost the same price so I think i'll sit on this for a while the loss relief won't be a major problem but i'm certainly not buying any more. The gross roll up and exit tax just doesn't work alongside dollar cost averaging in my opinion as you are likely to buy at times when it is over valued and at times when undervalued and when you sell you will be paying a sinful 41% tax on your gains without been able to deduct your losses first which should be illegal .

I'd say if you have a lump sum to invest and can pick one ETF thats accumulating and suits your needs then its perfect. Forget about it for 8 years.

I wanted to find on revenue site myself where it said investment trusts are taxed at x% but of course revenue would never make it that easy for someone to find. I'm guessing that because the investment trust is a share that it comes under shares taxation and there is no need to make a separate post about it , but i still think Revenue should make special reference to it to help novice investors like myself.

I just googled investement trusts and read about them on a few sites , Sarenco mentioned AIC website which is very good , I sorted the trusts by TER ( this may not be the best method ) as i want low cost , I then looked at that NAV discount or premium from little reading I've decided not to pay over 5% premium or to take a trust with an under 5% discount , I then just had a look at previous returns and charts to give myself and idea of volatility and had a look at the gearing of the trusts , the performance of the trust in comparison to similar trusts and the holdings , dividend yield etc. Googling investment trust portfolios brought up a few sample portfolios . There is good reading on trustnet .com and morningstar uk , I am shocked at how much these trusts outperform ETF's even without them been tax favourable had I read all this about trusts I would have went with trusts over ETF's , you can only buy them or they are mainly on the london stock exchange and in GBP which is the only downside but i suppose having have my net worth in another currency is some diversification in itself.

I'm just reading the posts above and there may still be some grey area of how trusts are taxed which is unfortunate I know Sarenco is fairly certain but this is where the lack of clear guidance from revenue leaves things open to interpretation , I am going to ring revenue today and see can I get a clear answer.

 

[landlord]

Fella .....
Please let me know with all that research if you stumble across any investment trusts where the asset manager targets non-distributing stocks. I really want zero income and no tax headache !!
Thanks.....

 

[Gordon Gekko]

Are you referring to the Aberdeen Asian Income Fund Limited? That company is incorporated in Jersey and is regulated as a collective investment fund under the Collective Investment Funds (Jersey) Law 1988. Very difficult to argue that a company is not a fund when it is treated as such under the laws of its own domicile!

Would you care to name the Big 4 firm in question? I would be astonished if any Big 4 firm ever formed such an opinion but I can check this quite easily if you would care to name the firm.

Sarenco

The regulatory aspects of that fund are completely irrelevant in this context. The tests for "fund taxation" are "regulation" and "material interest" for collective investments in "good" jurisdictions. But for collective investments in "bad" jurisdictions (like Jersey), it's the "material interest" test only. Aberdeen Asian Income is subject to "fund taxation" because of the relationship between the market value of its shares and its overall NAV. The regulation that you refer to is meaningless in the context of Irish taxation.

It's hard to agree with your view that the Irish tax treatment of investment trusts is obvious and straightforward when you yourself seem to be confused by it!

Gordon

 

[Fella]

Why do revenue make is so complicated surely there is no benefit in it for them ?

We had someone here the other day speaking about conexim I think they are a financial advisor and was unsure of an 8 year rule towards a product , I think ETF taxation is clear now after revenue released guidelines my fear is they release further guidelines later to say investment trusts are taxed similar to ETF's . I emailed revenue today but they haven't replied yet .

We have some financial advisors or here just wondered would they say what they advise clients to invest in in Ireland ? Between direct investment in shares / trusts or ETF's ? Id imagine pay off debts and top up pension are ahead of that but for someone with no debts and pension maxed . Thanks

Is Ireland the worst country in the world to be an investor ? It looks that way to me , the more money I accumulate the more sympathy I have with the super rich who move there tax affairs to another country to escape paying extortionate rates of tax on savings and investments.

 

[Sarenco]

Sarenco

The regulatory aspects of that fund are completely irrelevant in this context. The tests for "fund taxation" are "regulation" and "material interest" for collective investments in "good" jurisdictions. But for collective investments in "bad" jurisdictions (like Jersey), it's the "material interest" test only. Aberdeen Asian Income is subject to "fund taxation" because of the relationship between the market value of its shares and its overall NAV. The regulation that you refer to is meaningless in the context of Irish taxation.

It's hard to agree with your view that the Irish tax treatment of investment trusts is obvious and straightforward when you yourself seem to be confused by it!

Gordon

Gordon

I referenced the applicable Jersey regulation to make the point that the Aberdeen Asian Income Fund Limited is authorised and otherwise treated as a fund (or a collective investment vehicle if you prefer) in its own domicile, Jersey. The material interest test is certainly relevant to the Irish tax analysis in this case because this company is an offshore fund.

UK incorporated investment trusts are not funds. They are fixed capital, public limited companies that are not authorised or regulated as funds or treated as funds for tax purposes in the UK. Shares in investment trusts are and always have been taxed in Ireland under the income tax/CGT regime in the same manner as shares in any other publicly traded company. Unlike the position with a fund, shareholders in an IT have no beneficial interest in the assets held by the IT.

Whether or not the shares in an IT trade at a premium or discount to their self-published NAV is irrelevant to this analysis. ITs, including REITs, are not required to be authorised as funds and are not entitled to be treated as funds for tax or regulatory purposes.

There really is no ambiguity.

 

[landlord]

Well I currently have the MSCI world UCIT ETF thats accumulating , my intention was to sell this but I'm trying not to make impulsive decisions (for once!) Its a case of more money = more problems.

I bought all of my MSCI world at almost the same price so I think i'll sit on this for a while the loss relief won't be a major problem but i'm certainly not buying any more. The gross roll up and exit tax just doesn't work alongside dollar cost averaging in my opinion as you are likely to buy at times when it is over valued and at times when undervalued and when you sell you will be paying a sinful 41% tax on your gains without been able to deduct your losses first which should be illegal .

I'd say if you have a lump sum to invest and can pick one ETF thats accumulating and suits your needs then its perfect. Forget about it for 8 years.

I wanted to find on revenue site myself where it said investment trusts are taxed at x% but of course revenue would never make it that easy for someone to find. I'm guessing that because the investment trust is a share that it comes under shares taxation and there is no need to make a separate post about it , but i still think Revenue should make special reference to it to help novice investors like myself.

I just googled investement trusts and read about them on a few sites , Sarenco mentioned AIC website which is very good , I sorted the trusts by TER ( this may not be the best method ) as i want low cost , I then looked at that NAV discount or premium from little reading I've decided not to pay over 5% premium or to take a trust with an under 5% discount , I then just had a look at previous returns and charts to give myself and idea of volatility and had a look at the gearing of the trusts , the performance of the trust in comparison to similar trusts and the holdings , dividend yield etc. Googling investment trust portfolios brought up a few sample portfolios . There is good reading on trustnet .com and morningstar uk , I am shocked at how much these trusts outperform ETF's even without them been tax favourable had I read all this about trusts I would have went with trusts over ETF's , you can only buy them or they are mainly on the london stock exchange and in GBP which is the only downside but i suppose having have my net worth in another currency is some diversification in itself.

I'm just reading the posts above and there may still be some grey area of how trusts are taxed which is unfortunate I know Sarenco is fairly certain but this is where the lack of clear guidance from revenue leaves things open to interpretation , I am going to ring revenue today and see can I get a clear answer.

Fella just out of curiosity which provider did you go with for your world MSCI ETF. Was it I shares?

 

[Fella]

Fella just out of curiosity which provider did you go with for your world MSCI ETF. Was it I shares?

I use Ishares , I'm was reading loads about investment trusts there is endless information on the internet not sure if that is a good thing or not . I'm just too busy at the moment to make a concrete decision about my financial future , I'm transferring 5k a day into Saxo so I am ready to go when I decide what I am going to do. I have come back to the idea of keeping the MSCI world ETF and adding more to that so that I have a large lump sum and make that my initial investment , then like yourself either buy berkirshire hathway or a fund or just buy an individual stock at random every few months when I save more money , I have no real plan which annoys me , I'm 34 now and i'll likely see a few crashes before I ever take this money out but is should appreciate in value over time. I believe that the markets are efficient so I'm getting par value whenever I buy. I should have listenned to Brendan's advice and just lumped all my cash into the stock market in one go. Buffet says stick all your money into a low cost tracker and keep 5% in cash , I feel like i'm not brave enough to make that move as much as i would like to . I wonder what Buffet's advice would be to an Irish investor who has 41% exit tax every 8 years.

Have you made a decision on what you are doing Landlord?

 

[Fella]

I was looking at a few funds that are accumulating earlier landlord , I like this FTSE tracker
http://www.fundslibrary.co.uk/funds...ss_doc_simplified_prospectus&user=hl_web_test

Legal and general class c its TER is only 0.06%

I seem to able to get the same TER same index trackers in investment trusts as I can in ETF's

 

[landlord]

I was looking at a few funds that are accumulating earlier landlord , I like this FTSE tracker
http://www.fundslibrary.co.uk/funds...ss_doc_simplified_prospectus&user=hl_web_test

Legal and general class c its TER is only 0.06%

I seem to able to get the same TER same index trackers in investment trusts as I can in ETF's

This is an UNLISTED UK unit trust.....I think? When I phoned a couple of these companies e.g. Fidelity last month, they said they would not accept investors on the irish tax system.
I have set out my investment plans and reasoning at the end of this thread.

http://www.askaboutmoney.com/thread...-but-virgin-stock-market-trader.193863/page-3

I know you're not supposed to time the market but I feel I need to wait until this Greek situation is sorted before I jump in.

Here are some listed FTSE 100 ETF accumulating UCITS trackers
https://www.justetf.com/en/find-etf.html?query=FTSE+100

 

[Fella]

Cheers you mention this headache about filing a tax return for dividends , I am trying to find out how to do that to see hassle it actually is , as usual its very hard to find info on the revenue website , is there a key post on how to pay dividend tax anywhere ? I can't find one.