Taxation of tracker bonds...

Discussion in 'Investments' started by rob oyle, Mar 17, 2017.

  1. rob oyle

    rob oyle Frequent Poster

    So, against my advice my mother invested in some of those Ulster Bank Combination Accounts several years ago. A proportion (in this case 20%) was 'deposited' in a high interest account (capital and interest of 10% paid after 2 years) and the balance was 'invested' with a view to 80% of the increase in a basket of shares paid out as a return at the end of the period. In this case, the return was of the order of 15% over 4 years.

    Now that the balance of her funds have been returned, I'm trying to ascertain the tax treatment of the two parts. As I would read it, DIRT should be taken from the interest paid after 2 years, but what is the classification of the second gain. If this is a capital gain, she'd be covered by the small annual allowance. If it's interest, there would be a further DIRT liability. Any had to deal with these products (and their taxation) before?
  2. dub_nerd

    dub_nerd Frequent Poster

    I don't know the answer but there's another possibility: there's a different (higher) rate of DIRT that applies to interest that is not paid out annually.
  3. Gerard65

    Gerard65 New Member

    Typically the entire proceeds from bank investments such as this are subject to DIRT, irrelevant of the 'split'. The reason for this is that the investment is established as a deposit account day 1 so not matter what the set up, structure etc. any profits will be liable to DIRT. I would imagine therefore that DIRT is payable on both But UB should be able to answer this very quickly.
  4. Brendan Burgess

    Brendan Burgess Founder

    Agree with Gerard

    These are deposit accounts with the rate of interest determined by the performance of some index.