According to iShares, the ETF arm of Barclays Global Investors, there are three key changes to recent tax laws that affect ETFs.

The changes, brought in under the government’s new tax regime introduced on 6 April 2008, has changed aspects of the tax status for investing in iShares Dublin-domiciled products. All 59 of iShare’s London Stock Exchange-listed ETFs are domiciled in Dublin.

The changes mean that investors will now be subject to a flat rate of capital gains tax of 18 per cent, this will apply to disposals of holding in all Dublin iShares that have UK offshore funds distributor status.

For funds with UK offshore distributor status, the new rate of capital gains tax will present individual portfolio investors with real tax savings – previously, even with maximum taper relief, the tax rate only went down from 40 per cent to 24 per cent for non-business assets.

Also, UK resident but non-UK-domiciled individuals may be taxable on the ‘remittance basis’ on non-UK-sourced income. However, for investors who have been resident in the UK for seven out of the past nine tax years, the remittance basis will generally only be available if a £30,000 annual tax is paid.

And finally, UK individuals owning less than ten per cent of the Dublin iShares funds are entitled to a ten per cent tax credit on dividend distributions from these funds. Prior to 6 April there was no tax credit on non-UK source dividends.

Nick Shellard, head of UK sales at iShares, says, ‘While the changes to the taxation laws do not impact extensively on ETFs, it’s vitally important that investors are careful to review the government’s new tax regulations of 6 April and understand how they impact ETFs, particularly as they become an increasingly mainstream product for high-net-worth investors.

‘While iShares can provide information to investors with a high level summary guidance on the tax implications, the tax treatment of iShares including rates and relief, are dependent upon an investor’s own tax circumstances, and we recommend that all clients seek specialist tax advice from their own tax advisers.’