What difference does the domicile of the funds I'm investing in have regarding taxes in the UK?

Question

I'm looking to invest some money and the investing website I looked at had two funds which looked near identical so I messaged the company asking what the difference was and they responded by saying that one of the funds was domiciled in Ireland and the other was domiciled in the UK, but that they invested in nearly the exact same shares. The only other difference was that the UK domiciled one was set up far more recently, within the last couple of years and so has fewer investors in it. They did say that this probably wouldn't matter to most investors but that there might be some tax differences which they didn't elaborate on.

Checking on the HMRC website I could only find information regarding what effect the domicile of the tax payer has not what effect the domicile of the fund has.

If relevant, I both live and am domiciled in the UK, and would be looking to invest in a stocks and shares ISA.

Answer 1

For an investment within an ISA it should not make any difference tax-wise. Personally, given that choice I'd go for the UK domiciled fund, just because there would be less doubt about (admittedly limited) UK FSCS investor protections applying if anything did go wrong with it.

For an "unsheltered" investment not in an tax-wrapper like an ISA or SIPP, it'd probably make even more sense to go for the UK domiciled one because the Ireland domiciled fund would be classed as "offshore" so far as HMRC is concerned, and above certain thresholds income has to be reported on the "foreign pages" of a self-assessment and there can be other complications like "Excess Reportable Income". It's simpler with UK domiciled funds.