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  • FIRST POST
    • westy22
    • By westy22 11th Sep 17, 8:31 AM
    • 1,040Posts
    • 850Thanks
    westy22
    Accumulation funds and Cost Price
    • #1
    • 11th Sep 17, 8:31 AM
    Accumulation funds and Cost Price 11th Sep 17 at 8:31 AM
    Hi

    Probably there is an obvious answer but I can't seem to get my head around it.

    I hold units of a fund within a SIPP and there is a large discrepancy between what I consider to be my Cost Price and what my broker is showing as the Cost Price of the investment.

    According to my broker's figures I am only seeing a small growth in the fund over several years, whereas as far as I am concerned the growth is much greater.

    They say this in their FAQs:

    Note that both income and accumulation dividends are included on your annual tax certificate as the income 'paid' within an accumulation fund is still taxable. When a dividend is paid on an accumulation unit the book cost of the investment is increased to ensure a corresponding reduction of liability to capital gains tax.

    Can someone please explain this logic to me and why would CGT even matter within a SIPP?

    TIA.
    Old dog but always delighted to learn new tricks!
Page 1
    • greatkingrat
    • By greatkingrat 11th Sep 17, 9:16 AM
    • 41 Posts
    • 45 Thanks
    greatkingrat
    • #2
    • 11th Sep 17, 9:16 AM
    • #2
    • 11th Sep 17, 9:16 AM
    For tax purposes it is treated as if you had been paid the dividend and then immediately reinvested it in the fund.

    So if you buy an Acc unit for £1, and it rises to £1.15, with a notional dividend of 5p paid out, instead of declaring a capital gain of 15p, you add the dividend to the purchase price and declare a capital gain of 10p (1.15 - 1.05) plus dividends received of 5p.

    Of course if the investments are held in a SIPP / ISA it is all irrelevant anyway, but I guess it is easier for the platforms to show the information this way for all customers than for just some.
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