MBA MBA;250735 wrote:I still can’t get my head around why I can’t just rely on the statement from II and just fill those numbers into my self assessment. I do understand it’s not easy to understand which income is Uk and which foreign etc. Anyway, thanks
My relative using a big-name "wealth manager" company does have an ERI section included in their annual tax report (it has a gains section too). They're paying a pretty penny (in terms of %-of-AUM) for that sort of service though; the basic (ERI-less) income statement is the only one the platforms have a statutory duty to provide, I think.
(Hmmm... I do vaguely remember someone here once mentioned AJ Bell might send out ERI info?)
Thing about dabbling in anything offshore (and Ireland/Netherlands/Luxembourg domiciled ETFs are offshore) is that their tax rules are different. I get the impression that until some years ago, HMRC was fairly relaxed about it... if punters didn't correctly account for ERI they'd just end up paying CGT on the gains rather than income tax on the ERI (and the amounts involved always seem to be quite small)... but the more you learn about UK taxation you realize that "thou shalt not sneakily convert income to capital gains" is one of its strongest underlying principles; possibly some folks were exploiting it as a loophole and HMRC came down quite strongly on this (with snotty letters to unsheltered ETF holders telling them to get things in order, including backdating for some previous years; this even took pro advisers by surprise I think. Some coverage at
https://www.edisonwm.com...hts/offshore-funds-eri/ ).
It was certainly on the "Office for Tax Simplification"'s (OTS) radar as something that could do with being addressed. e.g in
https://assets.publishin...d_party_data_report.pdf there's both a useful statement of how ERI arises:
Quote:Excess reportable income (ERI) is a UK tax concept, relating to UK residents
with investments in offshore funds (a widely defined term embracing various
forms of collective investment vehicles). Excess reportable income is not a
distribution from the fund: it is an attribution of undistributed income. The
income is taxable only because specific tax rules attribute the income to UK
resident investors so that income cannot be rolled up untaxed and later
converted to a capital gain.
and some stuff on what a PITA it is:
Quote:Investors in offshore funds are typically sophisticated investors, but they can
also be retail investors. Such investments might be held as part of a
managed portfolio or through an investment platform. The respondents to
the OTS call for evidence from within the banking and investment
management sectors consistently mentioned excess reportable income as a
complex feature of their tax reporting to clients and a possible barrier to
comprehensive reporting.
...
Offshore funds do not come under the legal jurisdiction of the UK, so they
cannot be compelled to report any information to HMRC or to present their
accounting information in a way that is compatible with the UK tax rules.
However, offshore funds with substantial numbers of UK resident investors
will typically apply to HMRC for ‘reporting fund’ status because investment
returns from reporting funds are taxed more favourably compared to returns
from non-reporting funds. Reporting funds must calculate their income in a
prescribed way and submit annual information to HMRC and must also
make information available to investors detailing their income per share or
unit held.
...
Currently, taxpayers must report excess reportable income to HMRC in their
Self Assessment tax returns. They may receive this information in a tax pack
from their investment manager or may have to employ an agent to calculate
it, or must otherwise find the information themselves (which may be
communicated directly to them, or published).
Many respondents to the OTS call for evidence – both investment managers
and tax agents – specifically mentioned certain issues they already face with
reporting excess reportable income:
• excess reportable income is easier to miss because there is no cash receipt
or other visible transaction
• reporting relies on information being provided by a foreign fund, which
could have a different year end and may take several months to issue their
own accounts, leading to delays
• the calculation of excess reportable income can be complex and mistakes
are common
However with the OTS being abolished (by Kwarteng, but AFAIK nothing has happened to reverse it), who knows whether there'll be any improvement in the situation. Seems that everyone agrees it's something that should be fixed... but then just nothing happens.