CGT on monthly Savings into an OEIC

Gollum6972

Hi all, I have had a search for this question but could not find it posted, so apologise in advance if it has been asked before.

OK, I have been investing monthly into an OEIC for a number of years and am at the point where I am thinking of encashing part of the investment.

As I understand in order to work out my possible CGT liability I would "pool" all my costs and shares together. i.e. I would need to add up all my amounts invested and divide that by the number of shares I hold to work out my average price.

If / when I decide to sell I could then use the sell price to calculate any gain I have.

However, the question I have is how do I treat the equalisation payments I have received from my distribution payments?

As I understand I would need to deduct these amounts from my purchase costs. But how do I apportion the amounts? Do I need to contact the fund manager to ask how they sell shares i.e. on a LIFO or FIFO basis? If they operate on a FIFO basis I could then look back the the tax vouchers to which the shares I am selling relate and work out what equalisation payments I have received and deduct that from the purchase cost.

The reason I am asking the above is that I have other gains from assets sold this tax year and I only wish to sell enough to ensure I do not breach the annual CGT allowance of £9600.00

Any help guidance on the above would be greatly appreciated.

Many thanks

Toni_Tax

Hi Gollum,

1. Shares purchased since 16/03/98 are sold on a last in first out basis (and taper relief applied).
2. Shares purchashed from 31/03/82 - 16/03/98 are 'pooled' (and indexation added).
3. And then generally speaking, shares purchased before 31/03/82 are 'pooled' and valued and treated as if they were purchased on 31/03/82.

Equalisation payments are indeed deducted from the cost. The equalisation payment would be paid per share unit so the calculation would be;

total equalisation payment
total number of units x number of units in 'pool' or tranche purchased


Those monthly purchase scheme's are a nightmare to work out CGT on as, since 16/03/98, each purchase is it's own pool and therefore needed to be declared separately on the old style Tax Return (imagine all the entries for something that has been being purchased monthly since 16/03/98!). Even with the new style Tax Return you need to attach your calculations.

I would recommend doing a 'generalised' calculation to ensure your Gains are under the Revenue's reporting limits (proceeds of £38,400 and gains of £9,600) to save a lot of hassle!

If you want to pm me your personal email, I have a 'CGT calculator' on an excel spreadsheet. It's more geared towards 'pools' but might prove useful to you?

Gollum6972

Hi Toni

Many thanks for taking the time to respond.

I was under the impression that indexation and taper relief was abolished this tax year and was replaced by a flat rate charge of 18% to simplify matters? Or have I got that completely wrong?? I did not start the plan till way after 31 March 1982 so am glad that does not come into the equation - thankfully!

Gollum6972

Hi Jimmo

Thanks for the link, I had a trawl through the HMRC website before but didn't come across that, that has helped loads.

I think you are right, I just need to add up the total cost for purchasing the shares less an equalisation amounts that are applicable for the shares I am selling.

I also think that it works on a FIFO basis in that I sell the shares I purchased first unless they come under the 30 day or same day rules.

But am still confused on what Toni said re indexation and taper relief - am I right that this went on 6/4/08 and was replaced by a flat rate 18% tax??

Toni_Tax

Sorry Gollum ignore me - in the tax world you are always a year behind! Not even too sure of the new rules myself... will hang my head in shame and go away and read up!

Gollum6972

No worries Toni, I think I have got my head around it now, if, however in your reading you find out any additional information please let me know as the more people who confirm the more comfortable I feel I am on the right track.

Gollum6972

Hi Jimmo

You are right, I have been overcomplicating matters now I have read more into it. The same day and 30 day rule only apply if I have sold and re-bought shares.

As you stated, I just need to add up the total cost (less any equalisation payments) and divide that by the number of shares to find my average price. When / if I decide to sell I will easily be able to work out my exact gain.

Many thanks for taking the time to respond, it is very much appreciated.

Gollum6972

Just some further information on the above in case anyone else looks up this thread.

If you hold accumulation shares which are subject to income tax, you can add the distribution payment(s) to the acquisition costs to increase the total price paid. These payments are known as notional distributions and are allowed as additional expenditure (Funds who offer accumulation shares will automatically re-invest any income which results in the unit / share value increasing).

For income shares or shares which are set up to re-invest income to purchase additional shares I understand the above cannot be used.

As always, please be sure to check the above out with HMRC or a qualfied indvidual as this is just my interpretation of the rules.