Key Post Suitable investments for those with CGT losses to use up

Like a lot of people, I have a lot of losses forward for CGT purposes.

Normal shares like CRH or DCC pay dividends which are taxable at 50%.

It would suit me much better if they didn't pay any dividends. Assuming the share price rises if the cash is reinvested, then I would be getting the income tax-free as capital gain.

Is there any investment where the income is reinvested so that it would be taxed as a Capital Gain?

Are there blue-chip companies who have a strategy of not paying dividends? Berkshire Hathaway is the only one I can think of.
(We don't discuss the valuation of individual shares on askaboutmoney, so please don't speculate whether Berkshire Hathaway or CRH is a good buy or not)

Ryanair had such a strategy, but changed it this year by issuing a large, taxable, dividend.

Unit linked funds don't work, as they are not subject to capital gains tax and so losses forward can't be used against them.

Are there any investment trusts which have a capital growth strategy? These might not be tax-efficient as they presumably are taxed within the trust on the income they receive.

Could an Irish company such as CRH issue a category of share for personal investors which would not get dividends?

Buying government gilts wouldn't work as the gains are not subject to CGT.

Is there scope for a product to be developed to solve this problem?

If I remember correctly, the 2010 Finance Act included a anti-avoidance measure designed to curtail the possibility of dividends being dressed up as capital gain receipts.

Hard to see AIB or BoI paying divies for a while

How about a split capital investment trust?

You give up the taxable dividends in favour of the more favourable cgt gains.

These funds fell out of favour over the last 10 years due to a raft of dodgy investments but the tax hikes on both sides of the Irish sea make for a reason to revisit this option.

Why not invest in profitable companies that do not pay dividends. It is often assumed that companies that do not pay dividends are in some sort of trouble, but this is not the case. Warren Buffett's company has never paid a dividend, adn according to him it never will as long as he is alive.
Lots of technology companies do not pay regular dividends and reinvest all their profits. I doubt you will find a company that has a set of dividend paying and nother set of non-paying shares, but I could be wrong.

Eureka! Isle of Man life assurance policies are subject to a "penal" 40% CGT. Not very penal if you can shelter any gains

I see Canada Life has a presence on Isle of Man and they claim to be safe. Not sure about the charges and you probably have to go through an IFA.

Does anybody know the cheapest (and of course safe) way to take out a Isle of Man life policy? A With Profit bond would be absolutely ideal.

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Have a look at iShares funds which end with acc (accumulated funds). These are ETFs which reinvest the dividends. You could get the iShares MSCI World Acc or a similar fund investing in global blue chips and only pay CGT on the gains (if there are any - you may end up with more losses to carry forward!).

Janman07 said:

Have a look at iShares funds which end with acc (accumulated funds). These are ETFs which reinvest the dividends. You could get the iShares MSCI World Acc or a similar fund investing in global blue chips and only pay CGT on the gains (if there are any - you may end up with more losses to carry forward!).

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Janman, my understanding is that ETFs are taxed like life policies i.e. 28% exit tax and are not CGT chargeable. This is certainly true of ETFs quoted on the ISEQ but maybe foreign ETFs are different.

A few housekeeping points for this thread.

"duke's" post was inspired but won't work unfortunately. CGT losses cannot be offset against gains on a non EEA life assurance policy. Good idea but no cigar.

Secondly, accumulation units of an ETF won't work either income distributions or accumulations are both subject to exit tax and cannot be offset against CGT losses these are different taxes.

We have already researched a detailed panel of split capital investment trusts which will be effective for the purposes outlined by Brendan.

Marc said:

A few housekeeping points for this thread.

"duke's" post was inspired but won't work unfortunately. CGT losses cannot be offset against gains on a non EEA life assurance policy. Good idea but no cigar.

Secondly, accumulation units of an ETF won't work either income distributions or accumulations are both subject to exit tax and cannot be offset against CGT losses these are different taxes.

We have already researched a detailed panel of split capital investment trusts which will be effective for the purposes outlined by Brendan.

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Marc, I checked with Revenue and alas you are correct, no cigar. How do we find more about these split capital investment trusts?

If anyone would like to explore this option in more detail we do provide a fee based investment consultancy and portfolio management service.

However since investment trusts pay no commission this isnt an area your typical financial adviser will understand.

An interesting article from 2009 on this product

http://www.guardian.co.uk/money/2009/nov/29/split-capital-dual-return-investment

CGT treatment of gains

I came across a structured product called "Twin Win" from a firm called Quintas....I have no connection with them and dont see value in such products. The only thing which caught my eye in the brochure was that gains are subject to CGT....it is set up as some sort of note rather than the usual deposit or unit-linked fund.

There is probably even greater counter-party risk with this than with the normal structures but the tax angle may possibly be of interest to people.

As I have already pointed out a listed closed end fund works perfectly well here

For the extra-brave ... Dot.com Mark 2 companies.

There are some investment trusts that pay very low dividends, like RIT Capital Partners, FTSE 250 quoted, most of any gains are fed into capital growth. I have no idea if they are a good/ bad buy, and anyway we can't discuss individual shares !!