Serious Issue for Tax Optimised Investment Solutions in Ireland

Brexit’s regulatory shake-up has led the UK government and the Financial Conduct Authority (FCA) to exempt UK investment trusts from EU derived cost disclosure rules under the Packaged Retail and Insurance based Investment Products (PRIIPs) Regulation.

While this move aims to revitalise the UK’s capital markets, it carries profound consequences for Irish retail investors, particularly those operating without professional advice.

In this article, we’ll explore the regulatory changes, the fallout for EU-based investors, the potentially punitive Irish tax traps and why DIY investing via platforms like Revolut, DEGIRO or eToro may leave you exposed.

Brexit-Driven Exemption from PRIIPs Cost Disclosure

In September 2024, the FCA confirmed it would forbear enforcement of PRIIPs cost disclosure requirements for London-listed, closed-ended investment companies, pending permanent legislative changes later in 2024/25

Under this forbearance, investment trusts may elect not to produce PRIIPs Key Investor Information Documents (KIIDs), nor comply with associated MiFID Articles.

The government’s statutory instrument to formally exclude these trusts from the PRIIPs framework came into force in November 2024, cementing their permanent exemption.

What Changed in Practice?

No More PRIIPs KIIDs. UK investment trusts ceased issuing EU-style KIIDs, which combine performance scenarios and cost disclosures into a standardised two-page format.

Adoption of AIC Ongoing Charges. Instead, trusts follow guidance from the Association of Investment Companies (AIC) and publish a single ‘Ongoing Charges Figure’ based on actual annual operating expenses.

New UK Retail Disclosure Framework (CCI). A bespoke Consumer Composite Investments (CCI) regime is under consultation, with final rules expected by mid-2025.

Impact on Irish and EU Retail Investors

Because UK-domiciled investment trusts no longer produce PRIIPs KIIDs, they cannot be marketed or sold to retail investors within the European Economic Area (EEA), including Ireland.

PRIIPs legislation remains in force in the EU, and without a KIID, the distribution to non-professional clients is in breach of EU rules.

As a result:

• Irish retail platforms have delisted or restricted access to many UK trusts.
• Cross-border sales without appropriate documents can trigger enforcement actions and client compensation claims.
• Reduced investment choice for Irish investors seeking exposure to specialist UK equity and alternative asset classes.

Although UK investment trusts can now present their fees more transparently to UK investors, the flip side is that, without an EU-compliant Key Investor Information Document, Irish investors are effectively barred from buying them.

Irish Tax Implications – Beware the ‘Gross Roll-Up’ Trap

Irish tax law treats collective investment vehicles under differing regimes.

• Gross roll-up regime – applies to ‘equivalent’ investment undertakings, including certain offshore funds and unit trusts. All of the fund’s income and growth roll up, and exit tax (at 41%) is applied to that growth every eight years for as long as the policy remains in force, regardless of whether there are withdrawals made from the policy.
• General tax principles (income tax & capital gains tax) regime – applies to direct investments in companies and investments that do not qualify as ‘equivalent funds’. Gains are taxed under standard Income Tax (up to 40%) or Capital Gains Tax (33%), depending on the nature of the return.

Non-professional retail investors who inadvertently invest in a UK investment trust, structured in a way that replicates an offshore fund, run the risk of Irish Revenue classifying it under the punitive gross roll-up regime, rather than the more favourable capital gains treatment.

The Perils of DIY Investing

App based platforms such as Revolut, DEGIRO and eToro have democratised access to global markets. However, there is a great deal of risk involved in being a DIY investor in Ireland.

Regulatory blind spots – these apps may still show UK trusts in their product list to Irish clients, without flagging the need for EU-compliant disclosures.

Tax misclassification risk – without guidance, you may buy shares or units through nominee arrangements that trigger gross roll-up treatment.

Compliance pitfalls – failing to hold the correct documentation or using an inappropriate account structure can breach Irish and EU rules, leading to penalties and retrospective tax bills.

DIY investors often overlook the fine print around residence, document requirements and fund classifications, exposures that professional advisers routinely manage.

Why Professional Financial Planning Matters

A qualified financial planner and regulated investment adviser can:

• Structure investments tax-efficiently
• Ensure your holdings qualify under the general income/capital gains regime, not gross roll-up.
• Verify product eligibility
• Confirm funds have the required EU-compliant KIDs or advise on alternative investments.
• Navigate compliance
• Keep you aligned with evolving disclosure regimes
• Provide holistic advice and integrate your portfolio into overall retirement, estate and tax planning, rather than isolated DIY trades.

Conclusion

Brexit-driven PRIIPs exemptions have restored cost transparency to UK investment trusts, but at the cost of withholding EU-style disclosures.

For Irish retail investors, particularly those investing solo via fintech platforms, this creates significant tax and compliance hazards.

Without PRIIPs KIIDs, UK trusts vanish from EU retail markets and without proper planning, ordinary investors risk punitive gross roll-up taxation under Irish law.

A seasoned financial planner not only safeguards against these pitfalls but crafts a portfolio optimised for both returns and regulatory peace of mind.