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Tax on Murray International B shares?

Investment | Investment Trusts Helpful? 12

Asked by shedi_knight, submitted 29 August 2012.

Open Quote To re-invest dividends efficiently from an investment trust, is it better to hold 'B' shares where the dividend comes in the form of additional shares (as in the Murray International B ORD MYIB), or have the dividends paid(as in the Murray International MYI) and buy additional shares with them? I am a basic rate taxpayer.End Quote

Answered by Justin on 04 September 2012

Investment Trust 'B' shares remain rare and their taxation depends on the investment trust in question. In the case of Murray International the extra B shares issued in lieu of a dividend are taxed as income so no difference in this respect between receiving a dividend or extra B shares. The only benefit of Murray B shares as I see it is the avoidance of dealing fees if you'd otherwise reinvest the dividend to buy extra shares (i.e. much the same as unit trust accumulation units).

By contrast Investor's Capital Trust B shares distribute income as a return of capital rather than extra shares, which means the payments are subject to capital gains tax when selling shares rather than income tax when the capital is received. This has some potential tax benefit for higher and top rate taxpayers, especially if the eventual gain falls within their annual capital gains tax allowance. Although if they end up paying capital gains tax the 28% rate for higher and top rate taxpayers is less of an incentive than the 18% rate when Investors Capital issued B shares in 2007 (higher rate taxpayers currently have to pay income tax at an effective rate of 25% of the dividend received).


Please note this answer does not constitute a recommendation or financial advice and should not be relied upon when making specific investment or other financial decisions. You should always undertake your own research into whether a product or service is appropriate for your needs and, if necessary, use a qualified professional adviser.

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Readers' Comments (1) - To post a comment please register or login .


Comment by shedi_knight at 8:51pm on 04 Sep 2012:

Thanks for that Justin - lots to think about there. I think Murray International pays dividends (or equivalent 'B' shares) four times a year. If you wanted to re-invest that over a number of years, then I guess the frequency of dealing charges is something to consider. I'll have a look at the Investor's Capital Trust. Thanks again.

Regards, Shedi Knight