Taxation of older USA domiciled ETF's structured as Unit Investment Trusts eg SPY, QQQ

[VOOVOO]

I have decided to purchase USA domiciled ETF's via tastyworks, transferring the dollars via currencyfair. I'm aware the elephant in the room with this plan is the taxation treatment but I am personally satisfied that most USA ETF's are very likely still taxed under CGT. I'm happy to take the risk that I end up having to pay gross roll up tax instead as I don't think it would be the end of the world if this happened and I will be keeping it only a relatively small proportion of my portfolio. But one thing that is putting me off is how to determine which USA ETF's are taxed under CGT and which are much more uncertain.

My understanding is that part of the reason for revenue withdrawing its USA ETF taxation guidance relates to Brexit technicalities. However, I also wonder if part of it is because not all USA ETF's are actually the same. I didn't previously realise this myself but older ETF's which are still extremely popular such as SPY, QQQ were set up as "Unit Investment Trusts (UIT)". Now I am far from a tax or legal expert but even just the fact that they have the words unit and trusts in their names and prospectuses makes me nervous about them being treated as offshore funds under gross roll up! So does this mean they are potentially subject to gross roll up instead of CGT?

I appreciate this is quite a technical question. I suspect I could get professional advice from several tax advisors and end up with different answers. Perhaps someone can shed light on it though? Am I safer to stick with newer ETF's which are not UIT's, such as for example IVV, VTI or VOO?

I think I probably will opt for one of these newer ETF's even just on the precautionary principle but it would be good to get some clarity on it. It's completely crazy that this level of analysis etc is required to sensibly invest ones savings in this country but that's a seperate discussion.

 

[joe sod]

Judging by your post I bet you know more about this topic than most people including myself. I never heard about the brexit factor affecting us Dom etfs. I thought brexit would only affect UK investment trusts, not the tax treatment but that they might not be available to buy on an Irish brokerage account in the future.

 

[VOOVOO]

Yeah, I'm not certain how big a factor brexit was. I had read that since the previous revenue guidance had said that non EU ETF's were subject to CGT, brexit would mean that UK domiciled ETF's would in theory all be taxed under CGT, despite them likely being structurally very similar to Irish domiciled ETF.

I suppose for whatever reason anyway, revenue have withdrawn the previous guidance and left it ambiguous. Perhaps it has to do with the older USA ETF's structured as UIT's instead.

 

[VOOVOO]

"Revenue said it was no longer possible to provide general guidance on ETFs because of “continual developments” in investments and regulation. “The UK leaving the EU is one example of a change that has an impact on Revenue’s ability to give general guidance on non- Irish ETFs,” it said."

This statement from revenue at the time would suggest Brexit was a significant factor. I think this is what I had read before. Would also go in favour of the argument that US dom ETF's are still taxed under CGT as revenue had previously said. The only thing that's changed from what I can see is that they are understandably no longer able to give a blanket assurance that every ETF outside EU is the same.