The Roadmap for Deemed Disposal - don't discuss other issues.

[LarryScott]

I bought €1 of XYZ online with Revolut just as a trial 8 years ago but bought €100k of XYZ a year ago.

You could allow a person to "reset" their counter if they wish. You have to do a return at least once every 8 years, but can resync earlier if you want.

In that case, they could just do a return on the €1 for the year they bought the 100k.

Alternatively, there could be a threshold for minor shareholding. If you have less than €1270 of ETFs, then there is no tax.

This is all self assessment and I think you could actually agree with Revenue to accept this approach or similar as a matter of convenience.

You can pretty much do it yourself already.

Every 8 years, perform an actual disposal (and repurchase) of all ETFs that you bought since the last return. This aligns all purchases to that 8 year cycle. ETFs that were already aligned will always fall on the 8 year anniversary, so they don't need to be realigned.

This does mean that you lose out on any future drop in the ETF rate for the "short" period at the start of each holding.

 

[Corola]

That's simpler but not financially better. Your first DD will be larger since you're paying tax on the gain of all eight prior years of investment, instead of just the first year.

Since stocks generally rise in value it's better to defer paying tax for as long as possible.

 

[CharlieMac]

Isn't that why his lordship the Duke, in relation to scrapping DD, keeps telling us be careful what we ask for? If DD goes we might be required to pay tax on gains every year.

 

[Corola]

Not exactly. I would rather pay a small tax every year on income (rolled-up dividends), than a big tax from year 8 on unrealised gains.

Dividends are "real" cash in your hand, unrealised gains could evaporate.

 

[faketales]

I think the complexity of DD is more of a problem than the tax itself. I am still confused how it works in year 16, 24 etc. if there have been drops in value since the original deemed disposal.

It’s also not ideal for monthly buys and forget. Maybe not too bad for older settled people but 8 years is a lifetime of change at a younger age especially if you had lots of changes like pulling money out for a need etc.

 

[RedDevil]

I think the complexity of DD is more of a problem than the tax itself

Easiest option seems to be Sell Pay and move on

 

[LarryScott]

I think the complexity of DD is more of a problem than the tax itself. I am still confused how it works in year 16, 24 etc. if there have been drops in value since the original deemed disposal.

All deemed disposals are not really paying a tax. They are (zero interest) loans to the government.

Technically, the tax is payable when you actually dispose of the ETFs.

Eventual Loss

year 0: 50k

year 8: 75k
gain: 25k
loan @ 41%: 25k * 0.41 = 10.25k

year 16: 45k
gain: -5k
Owed: 0 (no tax on net losses)
Repaid: 10.25k (you get the 10.25k from the government)
Net: 10.25k received

This also means if the rate decreases, then you get your loan back too.

Rate Decreases

year 0: 50k

year 8: 75k
gain: 25k
loan @ 41% : 10.25k

year 16: 75k (no further gain)
gain: 25k (still)
loan @ 38%: 9.5k
repaid: 10.25k
Net: 0.75k received