Exit tax (before 8 year anniversary of 1st purchase) on monthly ETF purchases

Dave Vanian

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This document would suggest losses within in the same UCITS can be offset against gains:


I've been advised something similar to what's in the Standard Life document linked here, but it was verbal advice. I don't have a link to back it up. I haven't yet followed through on the advice so I haven't bothered to get written confirmation. It was in the context of a Conexim platform account. I was told that if I move within the same family, e.g. from one Blackrock index-tracker to another Blackrock index-tracker, or from one Vanguard index-tracker to another Vanguard index-tracker, this event would not trigger Exit Tax and the investment would be deemed continuous.
 

Eeyore

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AAAContributor

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I was told that if I move within the same family, e.g. from one Blackrock index-tracker to another Blackrock index-tracker, or from one Vanguard index-tracker to another Vanguard index-tracker, this event would not trigger Exit Tax and the investment would be deemed continuous.

Fair enough. Yes, there is flexibility within policies / umbrella structures. Of that there is no doubt.

But in the scenario I pitched a few posts back where I was talking about (and the OP & ryaner) trades in a single UCITS ETF (not multiple ones or switching between different investments), if your personal account at Degiro had the following cashflows:

If I buy 1 share of an ETF @ €50 today, another share of the same ETF tomorrow at €75, and sell both shares the following day for €60 each, I've made a net monetary loss of €5. There can't be tax due on the share purchased at €50 to compound my woes!

Do you cut a cheque to Revenue for zero, or €4.10 (€10 x 41%), and why exactly?
 

ryaner

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I did contact Revenue for clarification back in February but haven't heard back yet, however I did get some information from someone with an Irish Life managed fund. In their case they too are investing monthly and the deemed disposal happened on the 8 year anniversary of the first investment with no more in the multiple years after that point. The FAQ they get with their statement says it occurs "On every 8th anniversary of the plan".

The original ETF document (that is currently unavailable) did say "The tax treatment of investments in Irish Domiciled ETFs and ETFs domiciled in EU countries other than Ireland follows precisely the treatment set out in Chapter 1A of Part 27 TCA 1997 for investments in Investment Undertakings (IUs) – see Tax and Duty Manual (TDM) 27-01A-02." which would definitely point to this pay on the 8th, 16th, 24th etc years.

Doesn't clear up the calculation and loss relief question if using full FIFO, every investment company I've found information from is using the average cost method which, indirectly at least, gives loss relief. It does all even out once you never sell an individual unit at a loss.
 

SPC100

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Ryaner, maybe they are updating the documents to address your query!

If it's every 8 years and using average/total cost that would be easier to manage.

There is another thread around here that I contributed too, proposing you could sell all and buy all back on the 8th anniversary of your first investment and then you would clearly have your next tax event at 8 years later.

Aside: Many moons ago with a quinn life investment, my understanding at the time was the tax would be in year 8, 16, 24 from the initial policy date.
 

ryaner

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We can only hope although it is hard to know which I'd actually like to see. In my case, due to some unlucky timing I guess, the difference will be a tax bill this year of ~200E if it is do everything individually vs multiple thousands if averaging as my first year had 1 single, small ETF purchase while starting out.

The Quinn investments all got taken over by Irish Life, and that is actually the policy I got to look at the documentation for. The quotes came from Irish Life after they applied the deemed disposal

The fees in selling and rebuying can add up as the portfolio gets larger. There is also a non zero risk that you could fall foul of different rules. For some of the less traded ETFs, even of major indexes, selling your entire portfolio could be >1% of the daily average volume. That said I have been giving it serious consideration and where the original query around the loss relief of individual purchases came from. My EU tracker ETF is a distributing ETF so the price fluctuates regularly and selling the entire thing could crystallise large losses if each month was to be counted individually.
 

SPC100

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Fwiw, my quinn life reference dates from before Irish life took them over.

I agree that buying and selling is not a free lunch, but you do gain from simpler paperwork afterwards and reset the 8 year clock.
 
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