LON:DEC | Interactive Investor - Hidden FX Charges

29th Mar '21 by hole73

8 comments 852 reads

Has anyone had issues with hidden charges (aka egregious FX rates) applied dividends from US stocks held through Interactive Investor (II)?

My kids have child ISA’s, in which they hold a small amount of LON:DGOC. They held 961 shares each on the ex-dividend date (6-Mar-21). On 26-Mar-21 the company paid a dividend of US cents 4 / share. The company give you the option of receiving your dividend in GBP and paid GB pence 2.85 / share (an FX rate of US$ 1.4035 / GBP 1.00. Unfortunately, this option is not available through II.

My kids received dividends of GB pence 2.19 / share at an FX rate of US$ 1.8265 / GBP 1.00. This is an FX rate premium of 30.1% over the rate applied by II, and a 29.0% premium of US$ 1.4134 / GBP 1:00 the 52 week high FX rate as reported by the Bank of England on 26-Mar-21 (https://www.bankofengland.co.uk/boeapps/database/Rates.asp?Travel=NIxAZx&into=GBP). The premium seems a little at odds with Interactive Investor’s state margin rate of 1.5% (https://www.ii.co.uk/our-charg...).

I understand their share-holding is tiny, and charges are on average (for smaller holdings) higher, I’m not sure they should be so much higher…?

Does anyone else have similar issues? Or can anyone give recommendations on better (more cost effective) brokers?

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gus 1065

29th Mar '21

Not challenging your maths but are you sure you haven’t been hit by a US Withholding Tax levy somewhere in the system? That could possibly account for a chunk of the apparent discrepancy. It can be as much as 30% of the gross dividend (or 15% if you’ve filled in a W-8BEN form).

Rusty2

The 4 cents is gross, you need to deduct either 30% or 15% if II reclaim the 15% withholding tax, maybe worth sending them an email Querying the amount. Some platforms are better than others at dealing with tax on us dividends.

hole73

Hi Gus, thank you, yes I've filled in a w-8BEN form.

Hi @Herbie47, thank you for the suggestion. I have filled in a W-8BEN form and have queried it with them

AWAnderson

14th Nov '21

Just come across this, - sorry to be late to the party. Yes Rustbucket is right, I also hold DGOC, now DEC ,with IWeb, and their policy is not to reclaim USA dividend withholding tax for UK listed companies receiving income derived in the USA. Therefore a net c.2p is paid from a 4 cent payout, ie around 2.85p less 30%, so I guess I.I. are the same. Other brokers may operate differently, I don't know.

Albertos

Hi Hugo

Interactive Investor (ii) normally deal with this well.

However, my wife's platform was transferred to ii from another provider and she duly filled in a W-8BEN on 14/6/21 relevant to the dividend to be paid on 24/6/21 - I noticed that 30% had been deducted from the June payment when I was reviewing in September (the September payment had the correct 15% deducted) and asked them to investigate.

They replied a day later :-

I haven't heard anything since - so you've reminded me to chase them.

I strongly suspect they are going to say the W-8BEN was submitted too late for them to action (10 days) for the June payment - whether they are trying to recover for me I don't know - I'll let you know if I actually get a reply.

Just wondered if your form submission was close to the payment date in March and if subsequent payments have only had 15% deducted.

Phil

(Edit - just noticed the date of the original post - you've probably solved by now! Lol)

Metatron

If one holds an i.i account recommend one looks at Singapore listed stocks on which there is no govt tax on dividends .One can hold Singapore Dollars with i.i. Corporate governance in Singapore is the highest in the world as well.

LookingForValue

3rd Dec '21

The 30% difference looks like withholding tax. having said that, ii do charge a couple of %age for FX conversion on dividends

I have in the past written to ii asking for ISA accounts where possible they should opt to receive dividend in GBp from company to avoid Fx charges (unlike SIPP you can't hold foreign currency in ISA) - but they ignore it. I have another holding in Seplat Energy (LON:SEPL) where I get hit by fx charges on dividends and inspite of company having an option to receive dividends in GBp ii refuses to do so.

Maybe if more people complain they may do something about it but for now they can make money of us in this fx charges and they continue doing so.

Interactive Investor - Hidden FX Charges

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Hole73

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