Are Vanguard's tax-free ETF conversions tax-free in the UK

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Topic Author
rettir
Posts: 16
Joined: Sun Sep 11, 2016 7:15 am

Are Vanguard's tax-free ETF conversions tax-free in the UK

Post by rettir »

Vanguard offers "tax-free" conversions from certain mutual funds to their ETF counterparts. I suppose this means that the IRS accepts this as a tax-free procedure. Does HMRC view these conversions as tax-free as well?
TedSwippet
Posts: 5181
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Are Vanguard's tax-free ETF conversions tax-free in the UK

Post by TedSwippet »

rettir wrote: Wed Mar 15, 2023 11:03 am Vanguard offers "tax-free" conversions from certain mutual funds to their ETF counterparts. I suppose this means that the IRS accepts this as a tax-free procedure. Does HMRC view these conversions as tax-free as well?
Almost certainly not. The Vanguard fund/ETF equivalent pairs have different CUSIPs, and this makes them different and distinct for UK tax.
Topic Author
rettir
Posts: 16
Joined: Sun Sep 11, 2016 7:15 am

Re: Are Vanguard's tax-free ETF conversions tax-free in the UK

Post by rettir »

I see, so I guess if I'm on the remittance basis, I can do the conversion without worrying about UK tax consequences; but if I'm on the arising basis I'd have to treat the conversion as a sale+purchase on my UK self-assessment and pay the bill for the associated capital gains. Is that right?
tubaleiter
Posts: 247
Joined: Tue Mar 09, 2021 11:58 am

Re: Are Vanguard's tax-free ETF conversions tax-free in the UK

Post by tubaleiter »

Agree with TedSwippet, and to add to the fun, the mutual fund versions are not HMRC reporting (or at least I've never found one that is), while many of big ETFs are HMRC reporting. That means the capital gains from the sale of a non-reporting mutual fund are a) taxed at income rates (higher than capital gains rates) and b) not part of the annual capital gains allowance. Not pleasant.

Remittance basis may change all that, I'm not expert enough on it to have any intelligent comment.
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