Unit trusts and OEICs

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14. Taxation of unit trusts and OEICs - Introduction

The taxation of unit trusts and OEICs is identical as far as the investor is concerned.

• Investors are liable for income tax on dividend and interest distributions
• Investors are liable for Capital Gains Tax on realised gains, subject to normal allowances

Income is normally distributed from unit trusts and OEICs on set dates in the year, and usually the interim and final distributions are spaced 6 months apart. However, where the distribution is normally very small (e.g. on growth funds) it may be paid in one instalment. Other funds (e.g. specialist funds) may not make distributions at all.

An income distribution from an equity fund is called a dividend. A distribution from a non-equity fund (e.g. gilt and corporate bond funds) is sometimes referred to as the coupon. Dividends and coupons have different tax treatments, and these are set out on the next page.

1. What is a unit trust? 2. What is a unit? 3. The trust deed and scheme particulars 4. The people behind a unit trust 5. Charging structure of unit trusts 6. Pricing of units - FSA rules on maximum offer price 7. Pricing of units - FSA rules on minimum bid price 8. Pricing of units - in practice 9. Pricing of units - historic and forward pricing 10. OEICs - Open Ended Investment Companies 11. Shares in OEICs 12. OEICs - pricing 13. OEICs - charges 14. Taxation of unit trusts and OEICs - Introduction 15. Tax treatment of dividends from equity funds 16. Tax treatment of coupons from non-equity funds 17. Capital Gains Tax 18. Tax shelters 19. Investment powers of fund managers: 'eligible investments' 20. Diversification 21. Fund classification: risk gradings 22. Selecting a fund: Defining your objectives 23. Selecting a fund: Active vs passive 24. Selecting a fund: lump sum vs regular savings 25. Selecting a fund: Past performance 26. Where to buy unit trusts and OEICs 27. Buy with or without advice? 28. The mechanics of buying 29. The mechanics of selling 30. Share exchanges and fund switches 31. Investor protection 32. Conclusion

• Exchange-Traded Funds