8 Year Deemed Disposal

R

Rust40

Registered User
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My fund was subject to the 8 yr tax earlier this year.
1. Can I claim cgt annual allowance against this?
2. If I now cash in fund am I only liable for this year's gain?
 
Rust40 said:
My fund was subject to the 8 yr tax earlier this year.
1. Can I claim cgt annual allowance against this?
2. If I now cash in fund am I only liable for this year's gain?
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1. No, because it’s not CGT
2. Yes, account is taken of the tax already paid on the deemed gain
 
Gordon Gekko said:
2. Yes, account is taken of the tax already paid on the deemed gain
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Gordon,
Who decides "the deemed gain"?
What a pity too for the investor who loses the opportunity for his total investment to continue to gain. If the investor decides to put in the amount that's taken in deemed gain, will he have to pay fees to top it up? Thanks.
 
The life assurance company will calculate the deemed gain. The deemed gain is not actually taken from the fund. There is no need to take out the deemed gain as any future actual gain on encashment will allow for the tax that was deducted on the deemed gain.
 
Sorry Duke, don't think you understood my question, or maybe I didn't construct my question properly.
When the tax is taken from the deemed gain, can I just replace the taken tax from the fund ,and not involve a charge from the fund managers? Otherwise I lose out on accumulative interest gained going forward. I would be talking about a substantial amount. Hope you understand my query?
 
I think they tax will be taken in year 8 and the fund will obviously shrink a bit, I don't know if you can top up the tax taken but by having a reduced fund the future tax would be less unless the fund goes nuts and returns go nuts.

Revenue introduced this to get at your money that they would have to wait for, its maddening I know
 
noproblem said:
Sorry Duke, don't think you understood my question, or maybe I didn't construct my question properly.
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Well your question did talk about "the amount that's taken in deemed gain".
Note that under the old system tax was taken annually from the fund on its net income but only on realised capital gains. So no, companies would not allow a charge free facility for reinvesting the tax either on the old annual system or on the new system of tax at 8 year intervals (including tax on unrealised capital gains).
 
Of course you can.

For a life company investment, the tax is taken at source. Let’s say you stuck in €100 and after eight years it’s worth €200. The life company take €41 and pay it to Revenue.

You’re absolutely free to stick €41 back in at the same time though.

And for most non-life company investments, the tax is deemed, so using the above numbers, there’d still be €200 of value in the fund after eight years and the investor would typically fund the tax payment from his or her own resources.

As for the fund manager’s charge, that should remain unchanged at a fixed percentage of the fund’s value.
 
@noproblem Getting a bit confused here.
The question is whether the tax deducted can be replaced free of charge. I presume therefore that it is a domestic fund and the provider has deducted the tax. I also presume that a standard top up would incur entry charges otherwise the question doesn’t arise.
So if you replace the amount deducted by way of a top up of your investment that will incur those top up entry charges unless your provider specifically waives these charges in this situation.
Of course if it is a non domestic situation where you are directly liable for the tax then the the question doesn’t arise.
 
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Perhaps it’s the 1% levy for life funds that you’re referring to?

That arises for contributions but, depending on the amount we’re talking about, it’s possible to get the life company to effectively cover it through higher allocation.

The logic of the deemed disposal rules is obvious…they stop people rolling up their investments indefinitely and never paying tax.
 
Gordon Gekko said:
Perhaps it’s the 1% levy for life funds that you’re referring to?
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I wasn't specifically referring to the levy but obviously that is a factor. In my day there were bid/offer spreads or their equivalent but possibly that's all old hat.
As an aside, these products with their 41% exit tax and no relief for losses seem very inefficient to me.
With the ink hardly dry on the original legislation, which had no 8 year deemed disposal, a leading stockbroker was circulating its wealthy clients with the slogan "get a life belt round your investments". Charlie McCreevey was hopping mad and very quickly introduced 8 year deemed disposal, I think even retrospectively for anyone who got in quick.
 
Another aspect that’s really inefficient is the deemed disposal on death.

Say I invest €100,000 in two global equity funds, one that’s subject to 41% tax and one that’s subject to CGT.

Let’s say they’re both worth €200,000.

And let’s say I pop my clogs.

Mrs Gekko gets €200,000 from the CGT fund but only €159,000 from the 41% fund.

Madness.
 
Thanks for that information, we are presently scouring the internet to find a fund that is safe and with minimal tax , could you point me in a direction that would allow me to find something that CGT is payable we will be investing 100k and my health, while good now, might not be 10 years from now or sooner.
 
National Savings are safe (well, safeish) and little tax

Other than that there are UK Investment Trusts but which one?
 
Hi Paul,

I’d be wary of ‘scouring the internet’ and it depends what you mean by ‘safe’ and ‘with minimal tax’.

A portfolio of equities, an investment trust, or a Canadian ETF are potential options, subject to bottoming out on the relevant tax issues and risk appetite/capacity points.

My sense is that you need advice.

Gordon
 
We put a call into Zurich and got a call from a broker in Fermoy who started pushing New Ireland stuff and sent us the Zurich risk assessment form, just annoyed me .

Yeah I think you're right there are some posters who are giving great advice free, but I think paying for advice and throw everything into the hopper, pensions, and other future cash flows that are outside paye might be wise.

Thanks Gordon, appreciate the response.
 
You called Zurich, they got one of their sales rep to call you and he did what sales reps do - how is that annoying ?
What were you expecting - a full independent advice from a sales rep?

You need to pay for independent advice - it will cost you upfront and most people do not want to know - but be aware it will be expensive
 
Paul O Mahoney said:
Yeah I think you're right there are some posters who are giving great advice free, but I think paying for advice and throw everything into the hopper, pensions, and other future cash flows that are outside paye might be wise.
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Possibly if you have a more complicated set of circumstances professional advice might be of value. But on this narrow issue of domestic exit tax funds versus, say, UK Investment Trusts you seem to have already accepted the huge tax disadvantage of the former. And consider this, much of the former are sold/advised by professional financial advisors; is that advice really worth paying for?
 
I would have a fairly good understanding of funds the tax, fees, and other things and I'm good at forecasting, my pensions spreadsheet is always with 5% of what the statement would say, I'm usually more conservative so 5% down .

Just that she wants to pack in working 60/70 hrs a week at 62, shes well paid and we are maximizing AVCs she has 2 other pensions one DB the DC and I just got verification of PRB , small figure.

There is just a few things that I really can't articulate to her the state of play, she understands that she has enough but for the sake of a couple of grand it might be a more holistic approach and then let her make the decisions either verifying my approach or them making things better.

To be honest I fret over things and would probably like an independent review of everything including a large inflow of funds over the next 3 years, shares etc.

But thanks for the suggestion, I'm getting old and just need a break .
 
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