Hydrogen ETF

[taken2often]

I have never posted on this board as I was not that keen on this type of investing. 99% of my investing is in income ITs, Shares, Prefs and Pibs. But to day I bought for my taxable fund and share account a new ETF called VanEck Vectors Hydrogen Economy UCITS ETF Stock Refernce HDGB. Not available on ISA or Sipp as it is rated as High Risk. This fund only started in March. I came accross an advert today. I bought a 1000 units. For me this is a punt on what I think is a dead cert. When you think that you then get in early. Saying that I can afford the loss, always a factor.

Last October I changed over to all electric for various reasons. One being no gas boilers in Scotland soon. This has turned out well as I think I will save about £1000 in energy cost which is massive, but due to lots of different factors. I got lots of comments on LF and this has created a close interest in the energy situation and new information, to me is changing the ball game. There are all sorts of Youtube sites to look at for your own research. I do not record them so I wont be helping you to locate them. What turned up. A massive swing to Hydrogen as a preferred fuel. Many will say too expensive but remember they have us to pay for it. Here are some of the points

The major boiler manufacturers have developed Hydrogen systems and conversion kits. So I would imagine the oven and cooker industry will be doing the same.

Little known fact Hydrogen can be blended into Natural Gas. They even have a name for it BLUEH2. The starting point is 20% this gives a massive Co2 saving.

The testing has taken place. The manufacturers of Hydrogen will now have a massive potential market for this supply alone. This will reduce the price and your subsidy will be much appreciated.

There is Billions invested in the British Gas Pipelines. There are thousands of miles of Pipe giving a reliable supply system until 100% Hydrogen can come through if ever.

Batteries in cars, planes, trucks, buses, trains etc is just a future environmental nightmare no one is prepared to address at present. Hydrogen can be used in all these fields. All excess green power can be used to create Hydrogen and it can be stored.

Filling a Hydrogen car with fuel will take the same amount of time as current cars. No one addresses the down time to come trying to find a charger and waiting for the charge to take place and the fights over the chargers should be epic.

So there you are these are my reasons for this investment. As always only time will tell.

[JohnB]

You might want to move this post away from Passive Investing, as it sounds an active fund. I don't like Hydrogen because of its large conversion loses compared with electricity/battery, and the moral hazard of Blue Hydrogen. See http://www.csrf.ac.uk/2020/12/electrici ... n-economy/

[GoSeigen]

Hydrogen is a dumb idea. Barge pole needed.

GS

[taken2often]

Well to me this is an form of index fund and I intend to keep it forever so it is passive. I have laid out the logic, you do not like it thats great. There is always negative views. The motor car should never been allowed to dangerous and they are but we have millions of them. You think batteries are environmentally a good thing. I suppose if you can overlook the exploitation of poor African workers there fine. Anyway if you have a gas boiler I have prepared you, so you could do as I have done and gone all electric.

GS I want to make big bucks from any dumb idea that may turn out to be not so dumb. You have not pointed out what in my list is not possible. You could be right these dumb car manufacturers spending multi millions on creating Hydrogen cars. Perhaps some governments gave them the heads up as to the future. It aint petrol or batteries thats for shure.

Cheers

Bob

[mc2fool]

to day I bought for my taxable fund and share account a new ETF called VanEck Vectors Hydrogen Economy UCITS ETF Stock Refernce HDGB. Not available on ISA or Sipp as it is rated as High Risk.

? There is no prohibition for a holding in an ISA or SIPP based on its supposed level of risk, and, indeed, at least both ii and HL say they allow HDGB in both ISAs and SIPPs.

https://www.ii.co.uk/etfs/vaneck-vectors-hydrogen-ecoy-etf-a-usd-gbp/LSE:HDGB
https://www.hl.co.uk/shares/shares-search-results/v/vaneck-vectors-hydrogen-economy-ucits-etf-a

[taken2often]

Hi I tried using my ISA but it would not work. On the ETF fact sheet it had no positive marks against ISA and SIPP. So I ended up using my taxable account. It was ok as thats where I had the spare cash. I am hoping for a buffet type growth fund. Pays no dividends but obtains them to have continious growth, good for Capital Gains Harvesting.

[mc2fool]

Hi I tried using my ISA but it would not work. On the ETF fact sheet it had no positive marks against ISA and SIPP. So I ended up using my taxable account. It was ok as thats where I had the spare cash.

Must be a broker imposed restriction (who are you using?), as the VanEck website says it's ISA & SIPP eligible.
https://www.vaneck.com/uk/en/hdro?count ... nce=retail see right hand column.

Pays no dividends but obtains them to have continious growth, good for Capital Gains Harvesting.

It may not pay dividends out but you still get taxed on them. I generally avoid having "Acc" ETFs/funds outside an ISA or SIPP 'cos of the tax complications, but if that's where you had the available cash that kinda limits your choice.

[taken2often]

Hi thanks for responding. I have little knowledge of ETF's. How will I be taxed on growth

Thanks BOB

[taken2often]

Hi again I am with H-L the searc could not find it whilst in my ISA. On the H-L addresse provided above it says that it is ISA and Sipp. Just one of these strange things. Still the taxable account had the cash so I bought 1000 instead of the 500 I would have bought in the ISA. So time will tell.

Bob

[mc2fool]

Hi thanks for responding. I have little knowledge of ETF's. How will I be taxed on growth

The complexity is not just with ETFs, but with any kind of "accumulation" fund, be it ETF, OEIC or UT. I.e. one which doesn't pay out dividends but rather automatically reinvests them into the fund.

The taxman treats these exactly as if the dividends had been paid out and you then used that to buy more of the fund.

So, for income tax what happens is that you have to declare the notional dividend amount as if it had been paid to you, adding it onto any other dividends you might have received, and then the total being taxed as per normal for dividends (i.e. first £2k at 0%, then the rest at 7.5%/32.5%/38.1% for a BRT/HRT/ART respectively).

Then, for capital gains tax, as your notional dividend was reinvested into the fund, when you sell and it comes to calculating the capital gain, you must add the amount of all of the notional dividends received while you held the fund to the base cost of the holding.

For the income tax part it's easy as the amount of the notional dividends will appear on the consolidated tax certificate your broker gives you soon after the end of the tax year. For the capital gains tax part you have to remember to keep track of all those notional dividends for the time when you come to sell.

There's also potentially Excess Reportable Income to report, which I'll leave you to search for with the Lemon Fool, as it's been discussed here a few times. Here's a starter: https://monevator.com/excess-reportable-income/

[taken2often]

Thanks for that information. The only thing that comes to mind. Would you not have to receive additional shares. If no shares the ETF may pay corporation tax and the value of the fund would go up. I understand that IT and Unit trusts accumulater funds issue units.

Bob

[tjh290633]

Thanks for that information. The only thing that comes to mind. Would you not have to receive additional shares. If no shares the ETF may pay corporation tax and the value of the fund would go up. I understand that IT and Unit trusts accumulater funds issue units.

Bob

Accumulation funds roll up income in their units and do not issue new units.

Income funds pay out the income. If you reinvest it, then you get more units.

TJH

[taken2often]

Thanks for that, but I am still confused. I think this ETF is more of a growth fund. I would not expect to get a tax certificate. Just as I would not expect to get one from a growth IT or a company that pays no dividend.

Bob

[mc2fool]

Thanks for that, but I am still confused. I think this ETF is more of a growth fund. I would not expect to get a tax certificate. Just as I would not expect to get one from a growth IT or a company that pays no dividend.

How you think of it is up to you but what happens with dividends is a matter of law, and it's different for each of those three cases.

A "normal" company is free to choose (subject to shareholder approval) whether it declares and pays out a dividend or not, and if so how much.

An IT must declare and pay out as a dividend at least 85% of the dividends it receives from its underlying holdings, and must actually do so (there are no "accumulation" ITs).

An ETF, OEIC or UT must declare as a dividend 100% of the dividends it receives from its underlying holdings, and either actually pay it out or notionally do so and reinvest it, but in either case the taxman considers it as a dividend.

The only cases where an IT, ETF, OEIC or UT can declare no dividend is if either it receives no dividends from its underlying holdings, or it does but it takes costs out of income and the costs equal or exceed the dividends it receives from the underlying holdings.

[taken2often]

Thanks for your reply and clarification. I returned to www.vaneck.co./ucits/. I read the KID no mention of tax. Then the Prospectus. The fund is based in Ireland and pays no tax. If it gets income from Irish companies it can get a dispensation. If it pays a distribution of any kind it may have to pay tax. I then found a document that lists 10 UCITS ETF in dollars which may be their reporting document to the Irish Government which states No Distribution over the period up to June 2020. This states Amount Applicable in respect of the period N/A. So I would not be expecting a tax certificate from a non distribution. from a fund outwith the control of a UK government. It seems the only recorded data is a capital gain or loss. I will just have to wait and see.

Based on the theory behind this tax. If an IT only paid out 80% of the profit you should pay tax on 100% giving you a 20% credit to offset a capital gain that you might never received. But then you could add it to the loss. This would not be pracrtical or logical

Bob

[mc2fool]

Thanks for your reply and clarification. I returned to http://www.vaneck.co./ucits/. I read the KID no mention of tax. Then the Prospectus. The fund is based in Ireland and pays no tax. If it gets income from Irish companies it can get a dispensation. If it pays a distribution of any kind it may have to pay tax. I then found a document that lists 10 UCITS ETF in dollars which may be their reporting document to the Irish Government which states No Distribution over the period up to June 2020. This states Amount Applicable in respect of the period N/A. So I would not be expecting a tax certificate from a non distribution. from a fund outwith the control of a UK government. It seems the only recorded data is a capital gain or loss.

All of which is totally irrelevant. We are talking about how HMRC taxes a UK investor, not Irish taxes on the fund itself. And it's your broker that issues the CTC, not the ETF.

Based on the theory behind this tax. If an IT only paid out 80% of the profit you should pay tax on 100% giving you a 20% credit to offset a capital gain that you might never received. But then you could add it to the loss. This would not be pracrtical or logical

It's at least 85% for ITs and as I've already said the rules are different for ITs. (And different yet again for REITs.)

[daveh]

Thanks for your reply and clarification. I returned to http://www.vaneck.co./ucits/. I read the KID no mention of tax. Then the Prospectus. The fund is based in Ireland and pays no tax. If it gets income from Irish companies it can get a dispensation. If it pays a distribution of any kind it may have to pay tax. I then found a document that lists 10 UCITS ETF in dollars which may be their reporting document to the Irish Government which states No Distribution over the period up to June 2020. This states Amount Applicable in respect of the period N/A. So I would not be expecting a tax certificate from a non distribution. from a fund outwith the control of a UK government. It seems the only recorded data is a capital gain or loss.

All of which is totally irrelevant. We are talking about how HMRC taxes a UK investor, not Irish taxes on the fund itself. And it's your broker that issues the CTC, not the ETF.

Based on the theory behind this tax. If an IT only paid out 80% of the profit you should pay tax on 100% giving you a 20% credit to offset a capital gain that you might never received. But then you could add it to the loss. This would not be pracrtical or logical

It's at least 85% for ITs and as I've already said the rules are different for ITs. (And different yet again for REITs.)

Taken2Often (Bob) have you looked at the link quoted by mc2fool earlier in the thread? ( https://monevator.com/excess-reportable-income/ ) It explains the situation fairly concisely. I was almost caught out a couple of years ago by an accumulating ETF (from Vanguard) that I'd bought with the aim of avoiding dividend tax (when the allowance was reduced from £5k to £2k and I couldn't bed and ISA sufficient of my unsheltered holdings. Fortunately I realised in time and all I had to do was not be holding it on the relevant date for ERI reporting (which was a day at the end of June). I was lucky I bought after June in one tax year and was able to sell before June in the next tax year.