The Good, Bad and the Ugly

Duke of Marmalade

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I don't want to further mess up the Key Post. I think 3CC sums up the position well for most ETFs.

The more complicated question is this matter of what is a "good" or a "bad" ETF. A clear definition has been given so far as ETFs are concerned; essentially ETFs from tax havens are "bad" and all others are "good".

Now, as 3CC has pointed out, "bad" ETFs are in fact treated as material interests in an offshore fund and taxed at a super rate of 48% so these remain bad, or rather "ugly" in every sense of the word.

But the grey area, which interests me the most, are those collective investment vehicles which are constituted as fixed share companies (as opposed to open ended companies like ETFs), the most notable being UK Investment Trusts.

These are what I have been referring to as "bad" ETFs which is rather a misnomer as they are neither bad nor ETF:eek: The tax treatment of these should be obvious i.e. taxed as ordinary shares (which is now a good thing compared to 41% exit tax on ETFs). However, Rory Gillen has suggested that it is not completely airtight, hence why in 2013 I sought a direct ruling from the Revenue and was assured that they were taxed as ordinary shares.
 
Hi Duke,

I am not familiar with UK Investment Trusts but I would be interested in how they compare to ETF's as a potential investment.

Do you know if it possible to get an investment trust with a passive (tracking) investment strategy and that does not pay dividends?

Many thanks,

3CC.
 
This is one that I am in. We are not allowed to discuss shares here (maybe I can squeeze this in as an ETF;)). I am not recommending it, I just think this fact sheet gives a better flavour of what they are about. This one has .25% management fees and it tracks FTSE.

It pays dividends. As closed funds they all would need to pay dividends, I think. Otherwise they are worthless. The reason accumulator ETFs work is that there is a buyer of last resort who will pay the look through value (NAV). This is not the case for an Investment Trust which is a share pure and simple.

The attraction to me of a UK Investment Trust are as follows:

CGT friendly (esp. as I have bank losses carried forward)
Sterling exposure
Cheap and more or less passive
 
Thro' an Irish broker?
Good lord, no, I like to have something left to invest after commission:( [broken link removed] online works perfectly for me. Easy to sign up to, they accepted scanned ID, and those commissions really are cheap.
 
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