How to find HMRC tax reporting info for accumulation ETF

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Richard1035
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How to find HMRC tax reporting info for accumulation ETF

Post by Richard1035 » Thu Jan 09, 2020 6:27 am

I am having trouble finding the reportable income information that I need for my UK tax preparation. My concern is with Vanguard accumulation ETFs such as VWRA and VWRP. The reports I find on the Vanguard web site give the distributions for the income versions of these ETFs (VWRL and VWRD). The report also has information for those ETFs or which there is no income version, such as VVOL. How would I find the reportable income for VWRA? Should I simply add up all the income reported for VWRL?

E.g.  https://global.vanguard.com/portal/site ... ocId=18747
says that these USD per share dividends were made in the accounting period 1 July 2017 to 30 June 2018:

0.1822 21/09/2017 (goes on 17-18 UK tax return)
0.2068 21/12/2017 (goes on 17-18 UK tax return)
0.2075 22/03/2018 (goes on 17-18 UK tax return)
0.2028 21/06/2018 (goes on 18-19 UK tax return)

There is also listed a $0.0442 per share “Excess of reportable income over distributions”. Ii I were holding 1000 shares of VWRL then I would report this $44.20 on my 18-19 UK tax return (and increase my cost basis by $44.20, after converting to GBP using the exchange rate of 31/12/18). But what should I report if I am holding VWRA?

glorat
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Re: How to find HMRC tax reporting info for accumulation ETF

Post by glorat » Sat Jan 11, 2020 9:19 am

Answer: with great difficulty

I'd previously looked across the internet and these forums and the only advice I've read is not to have accumulating ETFs in a taxable account. (Pension/ISAs are fine obviously)

And even if there is an internet answer, it would need to be taken with a huge grain of salt since if it is wrong, you could get in trouble over your taxes. I.e. professional tax advice is likely required.

Disclaimers done, Please take my following amateur observations with a massive grain of salt
- The UK Tax documentation is behind the times as it covers funds but doesn't mention ETFs explicitly. See https://www.gov.uk/government/publicati ... tion-units . One may interpret that accumulating anything should have the reinvested component taxed as income. However, with auto-invested funds, you can usually see the number of units you see "earned" increase in number so the taxable gain is easy to calculate. It's also potentially possible to interpret that an ETF hides all this and you are holding units of the Vanguard share wrapper and treat the innards as a black box. In that case, VWRA dividends get bundled into capital gains of VWRA, which is tax at a lower rate. Noone knows. Related to my disclaimer above, you'll never see anyone give advice to treat this as such because if the advice is wrong, you'll have someone to sue.
- One might imagine that since UK tax law hasn't covered these ETFs properly, they are unlikely to "get" you for being a bit wrong. Unless someone somewhere in UK already has been penalised by the tax authorities for reporting accumulating ETFs wrong. Tax professionals may know
- The annual report for the funds *might* tell you how much dividends are earned and treated - and it would likely work out the same as pulling the dividend values from VWRL

As for me, I'm only making observations here. You'll get no new advice from me here

Topic Author
Richard1035
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Re: How to find HMRC tax reporting info for accumulation ETF

Post by Richard1035 » Sat Jan 11, 2020 11:04 am

Unless someone somewhere in UK already has been penalised by the tax authorities for reporting accumulating ETFs wrong.
See this article of 28/09/18 in the FT: "Thousands of investors ‘unknowingly’ fall foul of HMRC tax rules". https://www.ft.com/content/0d5fd242-c26 ... 6dfef1b89a

The authors write about the fact that "taxpayers need to put ‘excess reporting income’ on to their tax return and pay tax on it, even if the fund has chosen not to distribute it to the investor.”

I do not think it is complicated to understand the calculation that must be made. The HMRC offshore funds manual specifically mentions ETFs as attracting the tax treatment of mutual funds and discusses the objective that undistributed income be subject to dividend tax and not allowed to be rolled up in the fund for eventual taxation as capital gains.

Vanguard, iShares and others explain how the UK taxation should be calculated. See for example, see "Report of income for UK tax purposes
Xtrackers", https://etf.dws.com/en-gb/AssetDownload ... 2017.pdf/

There is an explanation of exactly what to do. We see for example, that

Xtrackers MSCI Japan UCITS ETF is accumulating and 0.2850 GBP per share should be reported for tax.

Xtrackers FTSE 100 Income UCITS ETF is distributing and the distributions of 0.3385 GBP should be reported.

Xtrackers Euro Stoxx 50 UCITS ETF is distributing. However, it is not sufficient simply to report the 0.9337 EUR that was distributed, there is also 0.0623 EUR of "Excess reportable income" that must also be reported. This is income that was not distributed, but retained in the fund. Just as with case of the accumulating fund there is income to report.

The most complicated case is the third one, a income paying ETF which also has excess income. This is the case for popular Vanguard ETFs such as VERX, VJPN, VFEM.

I used to think it would be easier to hold only income paying ETFs, like VFEM, in a taxable account, rather than iShares EMIM (accumulating). But in fact the tax reporting and record-keeping pain is similar. For both VFEM and EMIM, one has to look-up, and then pay tax on, the income that has not been received, and then increase one's record of the cost basis of the shares with an eye on the capital gains calculation that will need to made when the shares are sold. (If you do not keep track of this increase in basis you will end up being taxed twice on the same money.)

From the Vanguard web site, "If you hold Vanguard Irish-Domiciled funds (including our ETFs) (also known as reporting funds) in your Vanguard general account, then you may need to declare something called 'Excess reportable income. Excess reportable income is the amount an offshore fund earns beyond income declared as distributions – whether that's dividends or interest. This is extra income that can accumulate in your fund throughout the year.'"
Last edited by Richard1035 on Sat Jan 11, 2020 7:08 pm, edited 4 times in total.

Topic Author
Richard1035
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Re: How to find HMRC tax reporting info for accumulation ETF

Post by Richard1035 » Sat Jan 11, 2020 11:25 am

But what should I report if I am holding VWRA?
I think the reason I could not find the tax information for VWRA and VWRP is that these are new ETFs launched by Vanguard on 23 July 2019 and will create tax liabilities for the first time only in the 2020-21 tax year. The first accounting year of these ETFs will end 30 June 2020 and the first lot of excess income will deem to have been paid 31 December 2020. That is why I cannot now find any tax information published. We can expect Vanguard to put the information about taxable income on its web site in summer 2020, just as it does already for the longer established accumulating ETFs, VVOL, VVAL and VMOM.

See https://www.vanguardinvestor.co.uk/inve ... nformation

The tax information is found under Report to Participants (current and previous years).

xz1bogleheads
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Re: How to find HMRC tax reporting info for accumulation ETF

Post by xz1bogleheads » Sat Jun 27, 2020 3:35 pm

Is this conversation also related to non-ETF, but other Reporting Fund?

I own Vanguard Global Bond Index Acc in a taxable account, is that a mistake?

If the process of reporting it is much more complicated than normal fund, I'd rather hold it in a ISA instead (by swithing some ISA to Global Bond Index).

Original idea was that Bond is unlikely to grow faster than Equity, and that is why I hold it in my taxable account.

Valuethinker
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Re: How to find HMRC tax reporting info for accumulation ETF

Post by Valuethinker » Sat Jun 27, 2020 3:45 pm

xz1bogleheads wrote:
Sat Jun 27, 2020 3:35 pm
Is this conversation also related to non-ETF, but other Reporting Fund?

I own Vanguard Global Bond Index Acc in a taxable account, is that a mistake?

If the process of reporting it is much more complicated than normal fund, I'd rather hold it in a ISA instead (by swithing some ISA to Global Bond Index).

Original idea was that Bond is unlikely to grow faster than Equity, and that is why I hold it in my taxable account.
It is a mistake to hold an Accumulating fund outside of your pension or your ISA. The tax reporting can be a real pain.

The rule of thumb is to put bond funds inside the pension, first. Since I think virtually everyone (employed as opposed to self employed) in the UK now has a pension - albeit there may be little control over how it is invested (most of the default funds are pretty good, I think).

There's complex interactions around ISAs & taxable accounts. Because of the first amount of dividends being tax free, and because capital gains (currently) obtain a lower rate of taxation. But it's probably not too wrong to put your equity investments in your ISA, first.

Topic Author
Richard1035
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Re: How to find HMRC tax reporting info for accumulation ETF

Post by Richard1035 » Sun Jun 28, 2020 2:09 am

For Vanguard funds you will find the information you need for tax calculations in documents on this page.

https://www.vanguardinvestor.co.uk/inve ... nformation

Expand the tab called "Report to Participants (current and previous years)".

(My original question was about where to find this information for certain funds, but I subsequently realised the reason I could not yet find it was because the funds are only recently launched. The above page will have the information in due course when the "to June 2020" document is added.)

Both accumulating and distributing funds can have "excess reportable income" to report. This happens rarely for income funds, but does happen. This is charged to dividend tax or income tax (depending on equity or bond fund) and the cost basis is increased by the same amount so you will have less capital gains tax to pay when the investment is eventually sold.

There is no reason not to hold accumulating funds in a taxable account. The tax reporting calculation workload is similar for a distributing and accumulating funds, since distributing ETFs (frequently) and distributing funds (rarely) can also have excess reportable income to include for tax, albeit smaller amounts than do their accumulating siblings. It is a mistake to think that tax reporting pain is saved by preferring distributing funds to accumulating funds in a taxable account. Though I suspect that many people do not properly report for tax the excess reportable income of distributing funds, imagining that the dividends they have received is all there is to report.

Additionally to the above, it is worth being aware that index funds (not ETFs) can also have the issue of "equalisation" to take into account. A portion of the dividend received in the first year of ownership is a return of the purchase money, reducing the basis cost of a distributing fund, and does not incur dividend tax. Instead, there will be greater capital gains when the fund is sold because your true purchase cost was less by the equalisation amount. A broker's tax certificate usually includes information about the equalisation amount and you or your accountant should know how to use it.

xz1bogleheads
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Re: How to find HMRC tax reporting info for accumulation ETF

Post by xz1bogleheads » Sun Jun 28, 2020 4:15 pm

Richard1035 wrote:
Sun Jun 28, 2020 2:09 am
For Vanguard funds you will find the information you need for tax calculations in documents on this page.

https://www.vanguardinvestor.co.uk/inve ... nformation

Expand the tab called "Report to Participants (current and previous years)".

(My original question was about where to find this information for certain funds, but I subsequently realised the reason I could not yet find it was because the funds are only recently launched. The above page will have the information in due course when the "to June 2020" document is added.)

Both accumulating and distributing funds can have "excess reportable income" to report. This happens rarely for income funds, but does happen. This is charged to dividend tax or income tax (depending on equity or bond fund) and the cost basis is increased by the same amount so you will have less capital gains tax to pay when the investment is eventually sold.

There is no reason not to hold accumulating funds in a taxable account. The tax reporting calculation workload is similar for a distributing and accumulating funds, since distributing ETFs (frequently) and distributing funds (rarely) can also have excess reportable income to include for tax, albeit smaller amounts than do their accumulating siblings. It is a mistake to think that tax reporting pain is saved by preferring distributing funds to accumulating funds in a taxable account. Though I suspect that many people do not properly report for tax the excess reportable income of distributing funds, imagining that the dividends they have received is all there is to report.

Additionally to the above, it is worth being aware that index funds (not ETFs) can also have the issue of "equalisation" to take into account. A portion of the dividend received in the first year of ownership is a return of the purchase money, reducing the basis cost of a distributing fund, and does not incur dividend tax. Instead, there will be greater capital gains when the fund is sold because your true purchase cost was less by the equalisation amount. A broker's tax certificate usually includes information about the equalisation amount and you or your accountant should know how to use it.

Thanks for your reply. It seems to be so complicated that I don't grasp everything you said though... I still have the following questions.

- 1. I am currently holding Vanguard FTSE Global All-Cap Acc and the Global Bond Index Acc in my taxable account (I've filled my ISA with only the FTSE Global All-cap acc). The former is not a 'Reporting Funds' but the latter is. According to the page you sent above, does it mean, since the Global Bond Index is on the list, it will incur excess reportable income which is more complicated than FTSE Global All-Cap Acc since FTSE Global All-Cap Acc is not on the list?

-2. If I don't want the extra complication, should I move Global Bond Index Acc to ISA or Pension instead, and use General account only for Vanguard FTSE Global All-Cap Acc?

-3. If I take the action from 2. is the only tax involved the 'capital gain tax' when selling the Global Bond Index Acc, and the 'normal income tax' from FTSE Global All-Cap Acc? (and therefore no excess reportable rax involved, which I want to avoid?)

-4. What exactly is the tax for FTSE Global All-Cap Acc? Is it different than FTSE Global All-Cap Income? What would be the benefit of either? (except the acc would be convenient if I don't need the cash)

-5. I have chosen my pension to match 20% bond, and 80% equity which matches the world. Since I am going to also hold more bond, either in my ISA or my General account, should I simply dump all my bond holdings in the pension instead?

-6. I've changed quite often on my portfolio allocation in my ISA / general accounts. Would the switching itself cost money? (e.g., they would choose a good time to sell and buy, so I lose money during the process)?

- 7. You said
Richard1035 wrote:
Sun Jun 28, 2020 2:09 am
Both accumulating and distributing funds can have "excess reportable income" to report. This happens rarely for income funds,
but I've checked that Global Bond Index, both Income or Acc have the same tax status 'Tax status UK Reporting'. Is it one of the exceptions? Or did I miss something?

Thanks! Sorry for dumping many more questions...

TedSwippet
Posts: 2915
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: How to find HMRC tax reporting info for accumulation ETF

Post by TedSwippet » Sun Jun 28, 2020 5:36 pm

xz1bogleheads wrote:
Sun Jun 28, 2020 4:15 pm
- 7. You said
Richard1035 wrote:
Sun Jun 28, 2020 2:09 am
Both accumulating and distributing funds can have "excess reportable income" to report. This happens rarely for income funds,
but I've checked that Global Bond Index, both Income or Acc have the same tax status 'Tax status UK Reporting'. Is it one of the exceptions? Or did I miss something?
I think you are confusing 'excess reportable income' with UK 'reporting status'. Although their names look a bit similar, and they are tangentially related, they are actually entirely separate things. (You can thank HMRC for this confusion -- their motto is: "Tax doesn't have to be taxing, but we make sure it is anyway.")

The Vanguard funds and ETFs you will find sold to UK investors, on Vanguard's own platform or any of the usual suspects (Hargreaves Lansdown, Halifax -- aka iWeb and Lloyds, Interatcive Investor, and so on) will all either be UK domiciled or have UK 'reporting status'. So no 'offshore funds' tax issues with these. You can probably forget about anything to do with having, or not having, UK 'reporting status', then.

That leaves 'excess reportable income'. This is a stupid wrinkle in UK tax law whereby if a non-UK domiciled (but UK 'reporting status') ETF or fund doesn't distribute all its income as dividends, the bit not distributed is taxable anyway. There's an article here that describes what it is, and how to handle it:

https://monevator.com/excess-reportable-income/

It is obscure, and usually small. It applies to both income and accumulation fund units, so you won't gain much of anything by moving stuff around between taxable and SIPP/ISA accounts.

As for accumulation units in unwrapped taxable accounts ... I tend to avoid doing this because it prevents easy rebalancing using dividends. Rather than invest dividends in different funds to balance, you may instead have to sell some units to rebalance, and the sale then triggers a bunch of capital gains tax calculations that you avoid if you have distribution units instead and rebalance using their (paid) dividends.

The capital gains tax calculations aren't much harder with accumulation units than with distribution ones; it's just that you can usually avoid doing them for much longer, and much less regularly, if you hold distribution units in taxable accounts. For SIPPs and ISAs, accumulation units make sense to avoid regular reinvestment costs, and if you do have to sell a few units to rebalance there's no capital gains tax calculation needed.

So ... distributing in taxable and accumulation in SIPP/ISA is a workload efficiency optimisation rather than a hard rule. If a fund or ETF you want is only in one form, perhaps only accumulation units and no distribution ones, it's fine to hold that in a taxable account if that asset class belongs there. You just have to accept the minor potential added workload of both 'excess reportable income' and annoying capital gains tax calculations, and then declaring all that on a UK tax return every now and again.

thermo
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Re: How to find HMRC tax reporting info for accumulation ETF

Post by thermo » Sun Jun 28, 2020 9:10 pm

TedSwippet wrote:
Sun Jun 28, 2020 5:36 pm
xz1bogleheads wrote:
Sun Jun 28, 2020 4:15 pm
- 7. You said
Richard1035 wrote:
Sun Jun 28, 2020 2:09 am
Both accumulating and distributing funds can have "excess reportable income" to report. This happens rarely for income funds,
but I've checked that Global Bond Index, both Income or Acc have the same tax status 'Tax status UK Reporting'. Is it one of the exceptions? Or did I miss something?
I think you are confusing 'excess reportable income' with UK 'reporting status'. Although their names look a bit similar, and they are tangentially related, they are actually entirely separate things. (You can thank HMRC for this confusion -- their motto is: "Tax doesn't have to be taxing, but we make sure it is anyway.")

The Vanguard funds and ETFs you will find sold to UK investors, on Vanguard's own platform or any of the usual suspects (Hargreaves Lansdown, Halifax -- aka iWeb and Lloyds, Interatcive Investor, and so on) will all either be UK domiciled or have UK 'reporting status'. So no 'offshore funds' tax issues with these. You can probably forget about anything to do with having, or not having, UK 'reporting status', then.

That leaves 'excess reportable income'. This is a stupid wrinkle in UK tax law whereby if a non-UK domiciled (but UK 'reporting status') ETF or fund doesn't distribute all its income as dividends, the bit not distributed is taxable anyway. There's an article here that describes what it is, and how to handle it:

https://monevator.com/excess-reportable-income/

It is obscure, and usually small. It applies to both income and accumulation fund units, so you won't gain much of anything by moving stuff around between taxable and SIPP/ISA accounts.

As for accumulation units in unwrapped taxable accounts ... I tend to avoid doing this because it prevents easy rebalancing using dividends. Rather than invest dividends in different funds to balance, you may instead have to sell some units to rebalance, and the sale then triggers a bunch of capital gains tax calculations that you avoid if you have distribution units instead and rebalance using their (paid) dividends.

The capital gains tax calculations aren't much harder with accumulation units than with distribution ones; it's just that you can usually avoid doing them for much longer, and much less regularly, if you hold distribution units in taxable accounts. For SIPPs and ISAs, accumulation units make sense to avoid regular reinvestment costs, and if you do have to sell a few units to rebalance there's no capital gains tax calculation needed.

So ... distributing in taxable and accumulation in SIPP/ISA is a workload efficiency optimisation rather than a hard rule. If a fund or ETF you want is only in one form, perhaps only accumulation units and no distribution ones, it's fine to hold that in a taxable account if that asset class belongs there. You just have to accept the minor potential added workload of both 'excess reportable income' and annoying capital gains tax calculations, and then declaring all that on a UK tax return every now and again.
In very general terms, what is the situation for a UK domicile but non-resident? I complete a SATR for property income but my understanding is dividend and interest from UK investments is not subject to tax because I'm covered by a double taxation treaty with Singapore. Is that a broadly correct understanding?

TedSwippet
Posts: 2915
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Location: UK

Re: How to find HMRC tax reporting info for accumulation ETF

Post by TedSwippet » Mon Jun 29, 2020 2:41 am

thermo wrote:
Sun Jun 28, 2020 9:10 pm
In very general terms, what is the situation for a UK domicile but non-resident? I complete a SATR for property income but my understanding is dividend and interest from UK investments is not subject to tax because I'm covered by a double taxation treaty with Singapore. Is that a broadly correct understanding?
What UK investments do you hold? If you're asking about Vanguard's Ireland domiciled ETFs, these are not UK investments. There are very, very few UK domiciled ETFs. Other than that, sorry, no idea -- not my area I'm afraid.

Topic Author
Richard1035
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Re: How to find HMRC tax reporting info for accumulation ETF

Post by Richard1035 » Mon Jun 29, 2020 5:11 am

TedSwippet wrote:
Sun Jun 28, 2020 5:36 pm
So ... distributing in taxable and accumulation in SIPP/ISA is a workload efficiency optimisation rather than a hard rule. If a fund or ETF you want is only in one form, perhaps only accumulation units and no distribution ones, it's fine to hold that in a taxable account if that asset class belongs there. You just have to accept the minor potential added workload of both 'excess reportable income' and annoying capital gains tax calculations, and then declaring all that on a UK tax return every now and again.
TedSwippet has given an good summary and I agree with all he says. When starting out, I also followed a policy of using distributing funds in my taxable accounts and accumulating ones in my ISA and SIPP. Now that I have become more well acquainted with how to do the tax reporting I do not fear putting an accumulating fund in a taxable account if that is the fund I want. But I also tend now to prefer buying ETFs rather than index funds. I like that I can buy and sell at known prices and ETFs do not have the issue of "equalisation" to keep track of.

So far as I can tell the two funds mentioned by xz1bogleheads above are

GB00BD3RZ582 Vanguard FTSE Global All Cap Index Fund GBP Acc
IE00B50W2R13 Vanguard Global Bond Index Fund GBP Hedged Acc

These are both UK-reporting funds and so both can be held in ISA. If held in a taxable account then both have excess reportable income that will need to be reported each year on your self-assessment tax return. You can also find the amount of income that you need to report on page I gave above a link to above, and also on the Trustnet website. E.g. for the Vanguard Global Bond Index Fund look here under the dividends tab:

https://www.trustnet.com/factsheets/o/n ... -cap-index

You can also find the information in the Distribution Table of the Long Annual Report for the fund, E.g. page 115 of https://www.vanguardinvestor.co.uk/rs/g ... ts/1524/gb. This is a long pdf that covers more than one fund, so just search for "Distribution Table".
Last edited by Richard1035 on Mon Jun 29, 2020 5:55 am, edited 2 times in total.

Topic Author
Richard1035
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Joined: Thu Jan 09, 2020 6:17 am

Re: How to find HMRC tax reporting info for accumulation ETF

Post by Richard1035 » Mon Jun 29, 2020 5:24 am

thermo wrote:
Sun Jun 28, 2020 9:10 pm
In very general terms, what is the situation for a UK domicile but non-resident? I complete a SATR for property income but my understanding is dividend and interest from UK investments is not subject to tax because I'm covered by a double taxation treaty with Singapore. Is that a broadly correct understanding?
Broadly speaking, taxes are owed only to the country in which you live, excepting income arising from real property which can be taxed by the country in which the property is located, and excepting US persons who can be taxed by the US on worldwide income wherever they live. HMRC has informative web pages and a good twitter helpline at @HMRCcustomers. This is a broad rule. There are of course wrinkles, such as US withholding tax on US company dividends, which can vary from 10% to 30% depending on tax treaty between the country of your residence and the US (see https://www.irs.gov/pub/irs-utl/Tax_Tre ... 19_Feb.pdf).

thermo
Posts: 23
Joined: Sat May 30, 2020 10:32 pm

Re: How to find HMRC tax reporting info for accumulation ETF

Post by thermo » Mon Jun 29, 2020 5:40 am

Richard1035 wrote:
Mon Jun 29, 2020 5:24 am
thermo wrote:
Sun Jun 28, 2020 9:10 pm
In very general terms, what is the situation for a UK domicile but non-resident? I complete a SATR for property income but my understanding is dividend and interest from UK investments is not subject to tax because I'm covered by a double taxation treaty with Singapore. Is that a broadly correct understanding?
Broadly speaking, taxes are owed only to the country in which you live, excepting income arising from real property which can be taxed by the country in which the property is located, and excepting US persons who can be taxed by the US on worldwide income wherever they live. HMRC has informative web pages and a good twitter helpline at @HMRCcustomers. This is a broad rule. There are of course wrinkles, such as US withholding tax on US company dividends, which can vary from 10% to 30% depending on tax treaty between the country of your residence and the US (see https://www.irs.gov/pub/irs-utl/Tax_Tre ... 19_Feb.pdf).
Thanks Richard, very useful. I have both a Vanguard UK account, and a Singapore Interactive Brokers account. It's the Vanguard account that concerns me, but my understanding is as you say, that I would owe the Vanguard taxes in Singapore.

xz1bogleheads
Posts: 17
Joined: Fri Jun 12, 2020 12:25 pm

Re: How to find HMRC tax reporting info for accumulation ETF

Post by xz1bogleheads » Mon Jun 29, 2020 4:20 pm

Richard1035 wrote:
Mon Jun 29, 2020 5:11 am
TedSwippet wrote:
Sun Jun 28, 2020 5:36 pm
So ... distributing in taxable and accumulation in SIPP/ISA is a workload efficiency optimisation rather than a hard rule. If a fund or ETF you want is only in one form, perhaps only accumulation units and no distribution ones, it's fine to hold that in a taxable account if that asset class belongs there. You just have to accept the minor potential added workload of both 'excess reportable income' and annoying capital gains tax calculations, and then declaring all that on a UK tax return every now and again.
TedSwippet has given an good summary and I agree with all he says. When starting out, I also followed a policy of using distributing funds in my taxable accounts and accumulating ones in my ISA and SIPP. Now that I have become more well acquainted with how to do the tax reporting I do not fear putting an accumulating fund in a taxable account if that is the fund I want. But I also tend now to prefer buying ETFs rather than index funds. I like that I can buy and sell at known prices and ETFs do not have the issue of "equalisation" to keep track of.

So far as I can tell the two funds mentioned by xz1bogleheads above are

GB00BD3RZ582 Vanguard FTSE Global All Cap Index Fund GBP Acc
IE00B50W2R13 Vanguard Global Bond Index Fund GBP Hedged Acc

These are both UK-reporting funds and so both can be held in ISA. If held in a taxable account then both have excess reportable income that will need to be reported each year on your self-assessment tax return. You can also find the amount of income that you need to report on page I gave above a link to above, and also on the Trustnet website. E.g. for the Vanguard Global Bond Index Fund look here under the dividends tab:

https://www.trustnet.com/factsheets/o/n ... -cap-index

You can also find the information in the Distribution Table of the Long Annual Report for the fund, E.g. page 115 of https://www.vanguardinvestor.co.uk/rs/g ... ts/1524/gb. This is a long pdf that covers more than one fund, so just search for "Distribution Table".
Thanks for the detailed explanation!
I can see that Global Bond Index is 'UK reporting' (see https://www.vanguardinvestor.co.uk/inve ... _fund_link), but didn't see the 'UK reporting' for Global All-cap (https://www.vanguardinvestor.co.uk/inve ... _fund_link). Also, global all cap is not one of the listed funds for 'excess reportable tax' here https://www.vanguardinvestor.co.uk/inve ... nformation.

Did I miss something?

Also the link you mentioned is actually global all cap's https://www.trustnet.com/factsheets/o/n ... -cap-index, and under Dividends -> Tax Indicator it says 'No Tax'. I am confused.

I understood that only funds listed in '
List of reporting funds (ETFs and Non UK-domiciled)' in https://www.vanguardinvestor.co.uk/inve ... nformation'
are subject to excess reportable tax.

Topic Author
Richard1035
Posts: 9
Joined: Thu Jan 09, 2020 6:17 am

Re: How to find HMRC tax reporting info for accumulation ETF

Post by Richard1035 » Mon Jun 29, 2020 5:28 pm

Sorry, "UK Reporting Status" is terminology applying only to offshore funds. The fund domiciled in Ireland is offshore. But GB00BD3RZ582 is not offshore. Offshore funds have to apply specially for this status.

But both funds have income that needs to go on your tax return. This is the income that was reinvested and not distributed to you as dividends. HMRC wants to collect the appropriate tax on those dividends. It would be illogical if holders of the income version of the fund had to pay tax on dividends while those holding the accumulation version could essentially reinvest them in the fund tax free. This income is is referred to as excess reportable income. It can also be called notional distribution. This article from Barclays explains

"Income that’s ‘rolled up’ into your accumulation units is known as a ‘notional distribution’ and is taxable in the same way as the distributions from income units."

https://www.barclays.co.uk/smart-invest ... ion-units/

The words "No tax" simply mean that no tax has yet been deducted and so you are fully liable for tax on the amount stated. Having paid the tax, you can add this amount to your purchase cost so that there will be less capital gains tax when you eventually sell the investment.

xz1bogleheads
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Re: How to find HMRC tax reporting info for accumulation ETF

Post by xz1bogleheads » Tue Jun 30, 2020 4:00 am

Richard1035 wrote:
Mon Jun 29, 2020 5:28 pm
Sorry, "UK Reporting Status" is terminology applying only to offshore funds. The fund domiciled in Ireland is offshore. But GB00BD3RZ582 is not offshore. Offshore funds have to apply specially for this status.

But both funds have income that needs to go on your tax return. This is the income that was reinvested and not distributed to you as dividends. HMRC wants to collect the appropriate tax on those dividends. It would be illogical if holders of the income version of the fund had to pay tax on dividends while those holding the accumulation version could essentially reinvest them in the fund tax free. This income is is referred to as excess reportable income. It can also be called notional distribution. This article from Barclays explains

"Income that’s ‘rolled up’ into your accumulation units is known as a ‘notional distribution’ and is taxable in the same way as the distributions from income units."

https://www.barclays.co.uk/smart-invest ... ion-units/

The words "No tax" simply mean that no tax has yet been deducted and so you are fully liable for tax on the amount stated. Having paid the tax, you can add this amount to your purchase cost so that there will be less capital gains tax when you eventually sell the investment.
I am not sure whether Global All-cap would also have the excess reportable tax, as I believe it only has the normal dividends tax.

See https://www.vanguardinvestor.co.uk/inve ... nformation:
"How do I know if I need to declare excess income?
If you have invested in any of these funds below and you've checked with HMRC that you do need to, then you may need to report your excess income. Excess reportable income can be found in our Report to Participants."

And Global all-cap is not listed. So I suppose it only incur normal tax (seems that I will get a Consolidated Tax Certificate (CTC) which includes the details, so it seems to be not as complicated)

Topic Author
Richard1035
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Re: How to find HMRC tax reporting info for accumulation ETF

Post by Richard1035 » Tue Jun 30, 2020 4:26 am

xz1bogleheads wrote:
Tue Jun 30, 2020 4:00 am
So I suppose it only incur normal tax (seems that I will get a Consolidated Tax Certificate (CTC) which includes the details, so it seems to be not as complicated)
Both "excess reportable income" as shown in Vanguard's report for offshore funds and the notional distributions for onshore accumulation funds are subject to the same rates of dividend tax, so you need not worry about the particular names by which the income is labelled.

The point is that you owe the tax whether or not your broker has accurately included it in your Consolidated Tax Certificate. In past years I have seen some brokers saying nothing about the tax owed on accumulation fund units in the CTC. But in more recent years I have seen more and more brokers properly report it. I always think it is a good idea to independently verify the information shown in a broker's CTC. It comes to you with no warranty that the information there is correct. As I say, you can find the amount of taxable income for units of an accumulation fund by looking at the Distribution Table shown in the Long Form Annual Report, or very quickly on the Trustnet website.

The comment on Vanguard's page " ... and you've checked with HMRC ..." strikes me as strange. I have never heard of anyone checking with HMRC. And I can think of no reason why HMRC would ever tell someone they did not need to pay tax on this type of income. The HMRC reporting regime is explained here: https://www.gov.uk/hmrc-internal-manual ... l/ofm26100

Out of curiosity I have raised a question about this with HMRC via Twitter @HMRCcustomers. I will report back here if I receive an answer.

For further education about how reporting funds work, Blackrock have this helpful page https://www.blackrock.com/uk/individual ... und-status

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Richard1035
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Re: How to find HMRC tax reporting info for accumulation ETF

Post by Richard1035 » Wed Jul 01, 2020 4:16 am

I have had a reply from HMRC.

"If you has excess reportable income it must be reported on the foreign page of a self assessment return. You have correctly reported the income. We are unsure why Vanguard have put the caveat in their literature."

xz1bogleheads
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Re: How to find HMRC tax reporting info for accumulation ETF

Post by xz1bogleheads » Wed Jul 01, 2020 9:14 am

Richard1035 wrote:
Wed Jul 01, 2020 4:16 am
I have had a reply from HMRC.

"If you has excess reportable income it must be reported on the foreign page of a self assessment return. You have correctly reported the income. We are unsure why Vanguard have put the caveat in their literature."
That's interesting (to get a reply from HMRC so quickly!)

I am curious which fund was it about?

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