Non-reporting offshore ETFs and gains/losses

[karl2134]

I do have around a dozen ETFs in an offshore portfolio. Some of these are reporting ETFs and I am clear (well, I hope I am) as to the ERI implications of those ETFs. Also, my understanding is that gains/losses for reporting ETFs are treated as per the usual CGT rules.

However, I have also some ETFs which are non-reporting. I understand that for those any gains will not fall into the CGT regime but will count as and towards normal income (meaning I can't use the CG exemption for them). What I am unclear about is the losses side. Let's say I have two non-reporting ETFs and I sell both in the same tax year. For #1 I make a gain of £1000 but #2 generates a loss of £1000. Will these two cancel each other out for income tax purposes or do I pay tax for the gains but can't use the losses to offset the gains?

I have tried to google that but haven't been very successful so any explanation or link to further information would be v helpful. Thanks a lot.

[DavidTreitel]

Gains on non-reporting funds are never reduced by losses. This was in the law when the OIG rules were first created back in 1984. It is what Parliament intended. As you correctly note, the overall value of the investments could have fallen because of losses, but nonetheless any gains remain subject to UK income tax.

[karl2134]

Thanks for that. I have searched a bit more and, among other things, have found this page:
https://www.etctax.co.uk/blog-news/the-taxation-of-income-and-gains-from-offshore-funds/

Now, in the section titled "Opaque Funds with non-Reporting Status" the author has this to say:

Similarly, where units of funds are disposed of, these are not taxable to capital gains tax, instead these are taxable to miscellaneous income, referred to as offshore-income gains. The purpose behind this is to prevent funds rolling up income to increase the underlying value of the fund, which could then be disposed of and taxed according to capital gains tax, usually at a lower rate.

Where losses are made, these losses cannot be used against offshore-income gains and may only be used against capital gains, such as gains made on funds with reporting status.

If I understand that correctly, this would mean that I can't offset those losses against any gains in the same "offshore-income gains" category but I can offset them against "normal" gains within the CGT regime (if any of course).

I'll have to try and dig deeper...