Tax on Accumulation Units Fund Income

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Can someone please confirm if the income obtained through the sale of accumulation fund units is classified as capital gains for tax purposes?
Thank you

nomunnofun

The sale proceeds are liable to CGT- Yes.

Page 6:

http://www.hmrc.gov.uk/helpsheets/hs284.pdf

System

The link says:

"If you hold accumulation units you will not receive distributions of income
from the trust. Instead, the income is retained and reinvested automatically
for you (a ‘notional distribution’). You do not receive any new units, but the value of your existing units is increased. If you receive notional distributions which are subject to Income Tax, you are allowed the amount of these distributions as additional expenditure on your accumulation units."


What does that last sentence mean ? That the cost of the additional units is added to the base cost, so offsetting the ultimate CGT?

nomunnofun

Clifford_Pope wrote: »

The link says:

"If you hold accumulation units you will not receive distributions of income
from the trust. Instead, the income is retained and reinvested automatically
for you (a ‘notional distribution’). You do not receive any new units, but the value of your existing units is increased. If you receive notional distributions which are subject to Income Tax, you are allowed the amount of these distributions as additional expenditure on your accumulation units."


What does that last sentence mean ? That the cost of the additional units is added to the base cost, so offsetting the ultimate CGT?

The word 'offsetting' does seems strange. I have just presumed - higher base cost leads to less CGT i.e. if you don't include these additional dividends (distributions), one's CGT will be higher which all seems just a touch obvious.

System

So all it is saying is that it puts you in exactly the same position as if the distribution was actually paid out, but you then immediately reinvested it in the same fund?

That is, if you understand that you are allowed to do that, and remember to adjust the purchase price by the value of the accumulations.
But presumably you would adjust for the timescale of the accumulations, not simply add in the total amount as if accumulated on day one?

nomunnofun

Clifford_Pope wrote: »

So all it is saying is that it puts you in exactly the same position as if the distribution was actually paid out, but you then immediately reinvested it in the same fund?

That is, if you understand that you are allowed to do that, and remember to adjust the purchase price by the value of the accumulations.
But presumably you would adjust for the timescale of the accumulations, not simply add in the total amount as if accumulated on day one?

Actually - I don't think that you do. Because you are not actually purchasing any shares I believe that they are simply added to the base cost - no issues with pooling and suchlike.

Hopefully someone who is better informed will confirm.

jimmo

http://www.hmrc.gov.uk/manuals/cgmanual/CG57707.htm

00ec25

good example shown here
https://forums.moneysavingexpert.com/discussion/2370299