Vanguard Excess Reportable Income

[GeoffF100]

Vanguard has has published the excess reportable income for the last tax year:

https://global.vanguard.com/documents/i ... ome-uk.pdf

Fortunately, it is zero for VFEM this time, which saves me a bit of work.

[Steveam]

Hi Geoff, Thanks for posting this and the link. I've previously not held ETFs outside my SIPP. This year I started buying them in unprotected accounts and it hadn't crossed my mind to think about "Excess of Reportable Income over distributions". Fortunately for the ones I hold unprotected (VFEM, VERX, VJPN, VAPX, VMID) none have any excess. What does one do if there is an excess? Does one need to add it as if it were a distribution for tax purposes? How common is this?

And there was I thinking I was simplifying my affairs.

Best wishes and many thanks.

Steve

[mc2fool]

Vanguard has has published the excess reportable income for the last tax year

Actually it says it's for "1 July 2016 to 30 June 2017", which, of course, isn't the UK tax year.

I couldn't find the one I own, the Vanguard FTSE Developed World ex-U.K. Equity Index Fund, in it and then noticed that all of the ones in the linked-to PDF are Irish domiciled (ISIN starts with "IE") whereas the World ex-UK fund is GB domiciled, and on some further googling I see that excess reportable income (having any, and taxation thereof) is only an issue for offshore funds....

[GeoffF100]

Hi Geoff, Thanks for posting this and the link. I've previously not held ETFs outside my SIPP. This year I started buying them in unprotected accounts and it hadn't crossed my mind to think about "Excess of Reportable Income over distributions". Fortunately for the ones I hold unprotected (VFEM, VERX, VJPN, VAPX, VMID) none have any excess. What does one do if there is an excess? Does one need to add it as if it were a distribution for tax purposes? How common is this?

And there was I thinking I was simplifying my affairs.

Best wishes and many thanks.

Steve

Yes, you do need to pay tax on the excess:

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

Excess reportable income is usual for overseas funds, and that may still include all ETFs. The purpose is to prevent naughty people from avoiding tax by using offshore funds to roll up income as capital gains. A lot of the Vanguard ETFs have zero excess reportable income this year. That was not true previously. Perhaps that is due to a change of policy. Perhaps they are paying out income that they would previously have retained, e'.g. by taking costs from capital rather than income. It certainly makes life easier for us.

[GeoffF100]

Vanguard has has published the excess reportable income for the last tax year

Actually it says it's for "1 July 2016 to 30 June 2017", which, of course, isn't the UK tax year.

I couldn't find the one I own, the Vanguard FTSE Developed World ex-U.K. Equity Index Fund, in it and then noticed that all of the ones in the linked-to PDF are Irish domiciled (ISIN starts with "IE") whereas the World ex-UK fund is GB domiciled, and on some further googling I see that excess reportable income (having any, and taxation thereof) is only an issue for offshore funds....

1 July 2016 to 30 June 2017 is the accounting period for the fund. The excess reportable income is deemed to have been paid on 31 December 2017, which is within the last tax year. See Note 1 of the link:

1 Fund distribution date is the date on which the Excess of Reportable Income over Distributions is deemed as being received by relevant participants for UK tax purposes.
For the reporting period 1 July 2016 – 30 June 2017, the fund distribution date is 31 December 2017 which a UK individual relevant participant is taxable on in the tax year 6 April 2017 – 5 April 2018.

Vanguard FTSE Developed World ex-U.K. Equity Index Fund is UK domiciled, so excess reportable income does not apply. Excess reportable income does apply to Vanguard's Ireland based OEICs:

https://global.vanguard.com/documents/i ... eclass.pdf

(I could not see a link for the last tax year.) Confusingly, the Vanguard documentation just says that these funds are based in the EU. I have got the global bond fund, but it is in an ISA.

[GeoffF100]

Here is another helpful article:

https://www.kpmgreportingfunds.co.uk/guidance

in particular, it is the number of shares that you hold at the end of the accounting period that is relevant.

[mc2fool]

I couldn't find the one I own, the Vanguard FTSE Developed World ex-U.K. Equity Index Fund, in it and then noticed that all of the ones in the linked-to PDF are Irish domiciled (ISIN starts with "IE") whereas the World ex-UK fund is GB domiciled, and on some further googling I see that excess reportable income (having any, and taxation thereof) is only an issue for offshore funds....

Vanguard FTSE Developed World ex-U.K. Equity Index Fund is UK domiciled, so excess reportable income does not apply. Excess reportable income does apply to Vanguard's Ireland based OEICs

There seems to be an echo in here ...

Confusingly, the Vanguard documentation just says that these funds are based in the EU.

And so they are (Ireland is still is in the EU ). You can tell where they are domiciled from the ISIN; "IE" = Ireland. I suppose there is a confusion right now in that "GB" is also in the EU, but give it another 10 months and "based in the EU" will unambiguously mean "offshore"

[GeoffF100]

Vanguard still does not say that the global bond fund is Ireland domiciled, still less spell out the complications, on the vanguardinvestor site or in the KIID.

The Prospectus now does make it clear that the fund is Ireland domiciled, on Page 1. There is a section on taxation of the fund, but it does not give the information that UK shareholders need to file their tax returns.