Bed & Breakfast VLS80 > VLS100?

Hi,

I am approaching £10k profit in some unwrapped Vanguard Life strategy 80. To avoid paying CGT I am thinking of using my allowance to sell and as soon as the funds clear rebuy the 100 equities variant.

I am aware of the increased risk with vls 100. Would this work and is this a common move?

Thanks,
Olivier
«13

Replies

  • AretnapAretnap Forumite
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    Yes, I believe as they're different funds the bed and breakfasting rules don't apply. The fact that the funds are invested in broadly similar underlying assets doesn't matter. Likewise if you have a FTSE tracker you can get round the rules by selling your units, then reinvesting the money in a different FTSe tracker.

    If you wanted to keep the level of risk the same you could split the money 50/50 between the VLS60 and the VLS100, and then either rebalance as necessary, or just switch back to VLS80 once the 30 days are up.
  • dunstonhdunstonh Forumite
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    I am aware of the increased risk with vls 100. Would this work and is this a common move?

    No. Moves across risk profiles would not be common at all. You would expect to stay within the risk profile.

    Have you done bed & ISA?
    Use a similar fund that works in the same sort of way
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • EdSwippetEdSwippet Forumite
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    dunstonh wrote: »
    Would this work and is this a common move?
    No. Moves across risk profiles would not be common at all. You would expect to stay within the risk profile.
    More accurately, that would be yes, this works, and then... no, it's probably not common.

    Aretnap gives the simplest solution; switch to half LifeStrategy 60% and half LifeStrategy 80%. No change in risk profile, but different funds so you sidestep the silly 30-day "bed and breakfast" rules. I don't know of any other fund provider offering a similar and low-cost proposition to Vanguard's LifeStrategy range.
  • dunstonhdunstonh Forumite
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    I don't know of any other fund provider offering a similar and low-cost proposition to Vanguard's LifeStrategy range.

    There are several (including at least one that has a better asset mix)
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • dunstonh wrote: »
    There are several (including at least one that has a better asset mix)

    Thanks, could you please suggest some of these alternative funds? I am happy with vls80 but if there is a similar proposition with a better asset allocation I would be keen to research that!
  • bigadajbigadaj Forumite
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    Thanks, could you please suggest some of these alternative funds? I am happy with vls80 but if there is a similar proposition with a better asset allocation I would be keen to research that!

    The two that spring to mind are black rock consensus and l&g multi index. The latter includes property and is more managed (for good or ill) but is more expensive.
  • masonicmasonic Forumite
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    Why not just move from VLS 80 Acc to VLS 80 Inc or vice versa?

    I think we have discussed this topic before and concluded that a move from accumulation units to income units is not bed and breakfasting.
  • MalthusianMalthusian Forumite
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    masonic wrote: »
    Why not just move from VLS 80 Acc to VLS 80 Inc or vice versa?

    I think we have discussed this topic before and concluded that a move from accumulation units to income units is not bed and breakfasting.

    You concluded incorrectly then. Selling acc and rebuying inc is treated as a reorganisation of share capital which means there is no disposal and no use of your CGT allowance. The acquisition cost of your holding remains as it was before.
  • edited 28 July 2016 at 2:16PM
    bowlhead99bowlhead99 Forumite
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    edited 28 July 2016 at 2:16PM
    Malthusian wrote: »
    You concluded incorrectly then. Selling acc and rebuying inc is treated as a reorganisation of share capital which means there is no disposal and no use of your CGT allowance. The acquisition cost of your holding remains as it was before.

    No.

    As your link says, they are **treated as different classes of unit** and so there is no risk of being accused of bed-and-breakfasting them, and no need to worry about 30 day rules etc, because they are different instruments.

    So, if you ask the manager to redeem out of one and use the proceeds to subscribe into the other, the acquisition cost does not get inherited from the old holding of the different share class. They are separate financial instruments, just like if you sold the vanguard LifeStrategy fund class x accumulation and bought the vanguard Global Smaller Companies fund class y distribution, or for that matter, the HSBC FTSE tracker.

    A situation qualifying as a reorganization in your link is where the fund manager decides he is going to flip you from retail bundled class A to institutional class B or retail unbundled class C. He has switched you as a reorg and the principle is that you do not have to worry about paying taxes just because a company restructured (like if your 1000 x 1p shares of ABC PLC become 200 x 5p shares in a consolidation). In this case it is important that you do not get any cash proceeds from a disposal (even a temporary cash receivable within a broker or platform nominee account) and that it is truly seen as a "switch".

    But if you say you want to redeem your shares in an open ended investment company, or your units in an open-ended unit trust, and use the proceeds to buy a different class of share or unit, that is not a conversion, reorganization or switch. That is you selling something and getting proceeds which have to go through a CGT computation, and then buying something else which is a different class of unit and will have a new base cost equal to what you paid for it.
    masonic wrote: »
    I think we have discussed this topic before and concluded that a move from accumulation units to income units is not bed and breakfasting.
    Yes. Judicious use of the search tool and perhaps my name or your name or both, should find it.
  • ChickereeeeeChickereeeee Forumite
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    bowlhead99 wrote: »
    No.

    As your link says, they are **treated as different classes of unit** and so there is no risk of being accused of bed-and-breakfasting them, and no need to worry about 30 day rules etc, because they are different instruments.
    I interpret that differently.

    “Many unit trusts offer accumulation units and income units. These should be treated as different classes of unit” I take to mean it is the SAME unit, just different classes of it. Similar to going from ‘dirty’ to ‘clean’ class.

    What follows “Any switch from one class to another within the same unit trust should be treated as a share reorganisation” makes it clear that moving from Acc to Inc would not be a CGT event.


    The dicussion here: http://monevator.com/income-units-versus-accumulation-units-difference/ reaches the same conclusion (eventually).
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