Setting the scene - take a deep breath before reading this.....
As you will no doubt know, in the UK Individual Savings Account (ISA) are a class of retail investment arrangements available to residents of the United Kingdom. These qualify for a favourable tax status. Payments into the account are made from after-tax income. The total amount you can save in ISAs in the current tax year (2021/22) is £20,000. This is known as the ISA allowance. These accounts are exempt from income tax and capital gains tax on the investment returns, and no tax is payable on money withdrawn from the scheme either. Cash and a broad range of investments can be held within the arrangement, and there is no restriction on when or how much money can be withdrawn.
Even outside of an ISA, when we compare the tax treatment of the most suitable form of collective investment schemes across the EU UCITS funds, we find that the UK applies a logical approach of taxing income at the investors marginal rate with all personal allowances applied and gains at capital gains tax rates with all exemptions applied.
Since there are no ISAs in Ireland an Irish Resident holding an ISA is taxed on a look through basis to the underlying investment fund. These are invariably an Open-Ended Investment Company (OEIC) which is a form of UCITS fund and therefore subject to exit tax in Ireland at a flat rate of 41% on both income and gains and with no allowances for either your marginal rate of income tax or capital gains tax so that even a non-taxpayer with capital losses will suffer an immediate and punitive tax rate of 41% on both income and gains.
Tax is also due every 8 years on a notional gain even if the underlying investment is not sold. Finally, losses on one fund cannot be offset against gains on another fund. Overall, a punitive regime for investors and almost impossible to navigate for DIY investors.
Making the comparison with the UK again when it comes to general tax principles as they apply to personal investments, the annual capital gains tax exemption in the UK is currently £12,300 ( about €14,391) per person, per tax year compared to the miserly €1270 annual exemption in Ireland.
This means that in the UK a couple can make annual capital gains of €28,782pa before having to pay any capital gains tax and even then, the rate is only 10% (tax year 2020/2021) compared to 33% (tax year 2021) in Ireland.
What can be done?
In order to obtain the more favourable income tax and capital gains tax regime relative to the Gross roll up or Exit Tax regime that applies to Funds in Ireland, an Irish investor needs to access non-EU collective investments as set out in our Tax guide.
However, some of the limitations of our non-EU fund solution are that it
- Only applies to Equities, defensive investments still need to be arranged via UCITS or negative real- return cash deposits
- Requirement to complete a self-assessment tax return
Having read this far, you will have probably concluded that the UK is considerably more generous than Ireland when it comes to the availability of tax shelters for personal investments.
In our experience, many UK investors moving to Ireland make elementary and avoidable errors and our goal is to steer you towards the optimal solution for your personal financial situation.
The key issue to highlight upfront is that many of our recommendations are not available to retail investors and require a professional discretionary investment manager to implement. Our advice is therefore predicated on the assumption that you would be willing to have your portfolio managed in order to achieve the substantial tax advantages.
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 Undertakings for the Collective Investment in Transferable Securities (UCITS) is a regulatory framework of the European Commission that creates a harmonized regime throughout Europe for the management and sale of mutual funds
 A higher rate tax payer has a CGT rate of 20% and different rates apply to gains on residential property
 Such as US ETFs