A noddy question about PIDs

[Stolenscone]

Hi folks - I have a daft question that I feel I ought to know the answer to, and I wonder if someone could help?

I know that PIDs paid out by a REIT are subject to a withholding tax. My question is whether the withholding tax still applies if the REIT is held in an ISA? And if it does not apply, does the tax need to be reclaimed from the Revenue, or will the ISA operator (in this case Halifax) typically credit the account with the gross payment?

Thank you in advance for your help.

[SalvorHardin]

Hi folks - I have a daft question that I feel I ought to know the answer to, and I wonder if someone could help?

I know that PIDs paid out by a REIT are subject to a withholding tax. My question is whether the withholding tax still applies if the REIT is held in an ISA? And if it does not apply, does the tax need to be reclaimed from the Revenue, or will the ISA operator (in this case Halifax) typically credit the account with the gross payment?

Thank you in advance for your help.

Yes, the 20% tax on REIT Property Income Distributions (PIDs) is deducted at source like a withholding tax even if it is held in an ISA.

ISA providers should reclaim the 20% tax on PIDs (you cannot reclaim it yourself). Some of them credit the tax to your account when the PID is received. Some take a few weeks to do this. I've heard that some ISA providers don't reclaim the PID tax, or have to be asked to do it (I've not experienced this myself).

If you hold a REIT outside an ISA (as I do) then HMRC's system assesses tax on the gross dividend and offsets this with the 20% PID tax deduction.

[Stolenscone]

Thanks so much for your help. All understood. It should be easy enough for me to check whether the PIDs are paid across with the tax grossed back, or if I need to contact them to request a reclaim. At least I know what I should be asking!

Thanks again for your help.

[mc2fool]

Hi folks - I have a daft question that I feel I ought to know the answer to, and I wonder if someone could help?

I know that PIDs paid out by a REIT are subject to a withholding tax. My question is whether the withholding tax still applies if the REIT is held in an ISA? And if it does not apply, does the tax need to be reclaimed from the Revenue, or will the ISA operator (in this case Halifax) typically credit the account with the gross payment?

Thank you in advance for your help.

Yes, the 20% tax on REIT Property Income Distributions (PIDs) is deducted at source like a withholding tax even if it is held in an ISA.

No, not necessarily true. REIT holders that fit certain conditions, including ISA providers, can apply to have PIDs paid gross of tax, i.e. no withholding.

https://www.legislation.gov.uk/uksi/2006/2867/regulation/7/made

However, whether the broker does or not depends on their nominee structure. If all of the shares of XYZ REIT held on behalf of clients, both ISA/SIPP and non-ISA/SIPP, are in one holding by the nominee then they cannot make that application and all of the shares will have tax withheld, which the broker can then reclaim for the ISA/SIPP holders.

OTOH if the nominee keeps a separate holding of XYZ REIT for ISA/SIPP clients than for non-ISA/SIPP ones, then they can apply to have the ISA/SIPP holding PID paid gross of tax, with no withholding.

This happened with Interactive Investor. They used to pay ISA PIDs net of tax and reclaimed it, with the reclaimed amount appearing in your ISA 2-3 months after the PID. But then around September of 2020 they started paying ISA PIDs gross of tax, with no withholding.

I've not held REITs within my IWeb (which is Halifax of course) ISA, so I'm not sure which they do, but I expect someone who does will come along soon and say.

[daveh]

I've not held REITs within my IWeb (which is Halifax of course) ISA, so I'm not sure which they do, but I expect someone who does will come along soon and say.

HSDL pay gross and the dividend appears as a single payment on or shortly after the payment day (usually on the afternoon of the payment date).