Is a dropped market bad time to move funds?

Malthusian

Glen_Clark wrote: »

You are allowed £11,100 Capital gains in this tax year before paying tax. There may be an advantage in selling and repurchasing now, to reduce the possibility of being liable to pay Capital Gains tax when you sell in the future.

Doesn't make any difference. If the markets hadn't fallen you could still have reduced your future liability by selling and repurchasing a proportion of your funds.

Let's say you have 10 units bought for £5,000 and currently worth £25,000. You decide to raise a gain of £10,000 (to keep the maths simple), so you switch half your units into a similar fund - you now have 5 units bought for £2,500 and 5 bought for £12,500 - your new base cost is £15,000.

Alternatively you wait until the market falls and your 10 units are worth £15,000. You decide to raise a gain of £10,000, so you switch all your units - your new base cost is £15,000 again.

If anything there may be a disadvantage because market falls will make it more difficult to utilise the full allowance.

chucknorris wrote:

I was thinking about switching back again after the 30 day rule had lapsed (as the markets are down further), but I am unsure if the inland revenue might challenge me or not, by saying that because I am moving into similar (but slightly different) funds (i.e. ftse 100 trackers by different providers) that I am creating losses to 'avoid' tax. Has anyone got any opinions (facts would be even better) on this? I am wondering if the lines of tax 'evasion' and 'avoidance' would be unclear or not?

Switching between different FTSE 100 trackers with different providers to realise a gain is 100% OK and common practice. There is no question of avoidance or evasion.

Be aware however that in creating a loss you are rebasing the cost of your FTSE trackers to a lower figure. So assuming that they recover in value and you later sell or switch them, you will have created a larger gain. Which may wipe out the loss you've set against the investment property. (I can't say for certain that it won't work because it would depend on how you use your allowances in future years.)

chucknorris

Chickereeeee wrote: »

I would have thought your post worthy of another thread, Chuck?

C

I thought that too, so I might start one, I'm still within the 30 days, so I have a bit of time before having to make a decision, if the markets go up a few percent the opportunity will disappear anyway.

chucknorris

Malthusian wrote: »

Doesn't make any difference. If the markets hadn't fallen you could still have reduced your future liability by selling and repurchasing a proportion of your funds.

Let's say you have 10 units bought for £5,000 and currently worth £25,000. You decide to raise a gain of £10,000 (to keep the maths simple), so you switch half your units into a similar fund - you now have 5 units bought for £2,500 and 5 bought for £12,500 - your new base cost is £15,000.

Alternatively you wait until the market falls and your 10 units are worth £15,000. You decide to raise a gain of £10,000, so you switch all your units - your new base cost is £15,000 again.

If anything there may be a disadvantage because market falls will make it more difficult to utilise the full allowance.



Switching between different FTSE 100 trackers with different providers to realise a gain is 100% OK and common practice. There is no question of avoidance or evasion.

Be aware however that in creating a loss you are rebasing the cost of your FTSE trackers to a lower figure. So assuming that they recover in value and you later sell or switch them, you will have created a larger gain. Which may wipe out the loss you've set against the investment property. (I can't say for certain that it won't work because it would depend on how you use your allowances in future years.)

Yeah I am aware about the (hopefully) larger gains later on, but I am not intending to sell for about 10 years, so I have plenty time to bed and breakfast them over the years, even then I will probably be drawing down at only about 4% per annum.

It was my wife that raised the issue, my response to her was, well I can see what you are saying, but if I had done the same thing and made a profit, the inland revenue would certainly want CGT from me, so whats good for the goose, is also good for the gander. But I thought that it was worth bouncing it off the forum.

Thanks for your comments everyone.

Glen_Clark

Malthusian wrote: »

Doesn't make any difference.

It could make a difference to your CGT liability whether you transfer them in or sell and repurchase. Just though that was worth a mention.

ANGLICANPAT

Still none the wiser whether one needs to work out which clean funds a platform holds , are the nearest equivalent to what youre changing from ? I can of course ring and ask Fidelity do they do it, but I wanted to be sure it wasnt going to be the same as asking a shopkeeper abroad whether it was best for me to pay in local currency , or sterling - ie I dont have a clue whether its in Fidelitys best interests to tell me the funds that are actually the nearest /best for me , or ease me into ones which are best for them . Is it a concern I neednt have?

Chickereeeee

Generally you fill in a form on the receiving platform's website, and they do it all for you. There is - mostly - a clean fund 'exact' equivalent to a dirty fund, so if you are transferring in dirty, the receiving platform will convert to the clean class on receipt, or soon after.

One small caviat is that I notice Fidelity do a few 'superclean' funds which have slightly lower charges, so make sure they transfer you to those, if applicable.

A problem can arrise if you have Superclean funds to transfer in, of a class that the receiving platform does not support. If you are transferring in dirty funds, you will not have that issue.

C

Chickereeeee

Oh, and it is free to move between funds once you are on the Fidelity platform, of course. You are just out of the market for a few days.

C

ANGLICANPAT

Thanks Chickereee .I thought I knew the difference between a broker and a platform ie the broker being someone like Torquil Clarke who giving no advice, just take the instruction to buy your fund for you at a discount price, and hold details of it ---and a platform being something bigger like co-funds ,Cavendish Fidelity funds network and 3ii where you can put all your funds centrally to be looked after. I looked at Eco Misers Monevator link today to check platform costs again, and noticed its headed Flat fee brokers/Platforms all in the same list . Does that mean that they are the same animal? Is my broker Torquil Clarke also a platform Icould have chosen to group the different funds I have on? Ignorant question Im sure but there you go.
Just noticed that Monevator says their list is biased to show cheapest options for folk using index funds -trackers I presume , and ETF's . Most of mine are just ordinary funds , like Henderson Pref and Bond, in ISA wrappers, is there a different comparison chart I should be referring to for those sorts of funds?

Shimrod

ANGLICANPAT wrote: »

As regards moving equities into S&S isas , Ive only got a handful of TSB shares , is there much advantage to moving them in ,instead of using the allowance for cash?

Are you sure you have these? TSB was taken over last year and the shares are no longer listed.

ANGLICANPAT

Sorry, Lloyds I mean.