Capital Gains on ACC funds Calculation

Chickereeeee

I am sure it has been covered before, but I cannot find an exact match to this case. Can anybody provide me with the correct calculation, please?

1) I have holdings in ACC version OEIC/UTs. I have bought various amounts in different years, and now sell a proportion (say 10%) of them. How do I correctly calculate the capital gains, allowing for the income that has been received in the intervening years?

2) Last year, the funds were converted from dirty to clean class. How do I allow for this in future disposals?

I THINK I know the process, but would like to check my workings, and get the simplest method. (Same day and B&B disposals do not apply in this case)

Thanks

C

Malthusian

1) The costs of your various purchases are aggregated (assuming you aren't subject to bed and breakfast rules). I.e. if you bought 50 units at £5 each and 50 units at £10 each, and now sell 10 units, the allowable cost is £7.50 per unit = £75.

To get a fully accurate cost you will, as you have guessed, have to include the cost of reinvested dividends.

Does the platform you hold the units with have a capital gains tax calculator? By far the easiest way to work out the full acquisiton cost of an accumulation unit holding is to let a computer do it for you. Otherwise you may have to refer to your annual tax vouchers to work out how much the dividends were.

2) You don't, converting from dirty to clean shareclasses is a "reorganisation of capital" which essentially means you ignore it. No disposal occurred and your acquisition cost didn't change.

Chickereeeee

Malthusian wrote: »

1) The costs of your various purchases are aggregated (assuming you aren't subject to bed and breakfast rules). I.e. if you bought 50 units at £5 each and 50 units at £10 each, and now sell 10 units, the allowable cost is £7.50 per unit = £75.

To get a fully accurate cost you will, as you have guessed, have to include the cost of reinvested dividends.

Does the platform you hold the units with have a capital gains tax calculator? By far the easiest way to work out the full acquisiton cost of an accumulation unit holding is to let a computer do it for you. Otherwise you may have to refer to your annual tax vouchers to work out how much the dividends were.

2) You don't, converting from dirty to clean shareclasses is a "reorganisation of capital" which essentially means you ignore it. No disposal occurred and your acquisition cost didn't change.

1) No, no tool on the platform(s) and I have to see one one any platform. I have the annual tax vouchers, so computer = Excel

2) You do. Although the change to Clean was not a CGT event, when I come to sell it, the apparent 'purchase price' of the clean holding is not the true cost. The unit price of the clean fund is different to the dirty one, so I will have to manipulate the (already well-manipulated) aggregate purchase price of the dirty fund to get the purchase price of the clean fund for future CGT calculations.

C

dunstonh

1) No, no tool on the platform(s) and I have to see one one any platform. I have the annual tax vouchers, so computer = Excel

Lots of platforms have a CGT calculator on them. They track the sales and purchases and give a realised and unrealised figure.

Chickereeeee

dunstonh wrote: »

Lots of platforms have a CGT calculator on them. They track the sales and purchases and give a realised and unrealised figure.

Do they allow for dividends in Acc funds?

I have used Fidelity, YouInvest and iWeb (and HL in the past) but I have only ever seen a 'cost' column (which I believe is based on unit price alone), and which can be lost when transferring between platforms.

Be that as it may, I would still like to confirm the calculations!

Edit: I have just found a CGT calculator on Fidelity - which seems to be only available if you select 'investing without advisor'. Which as I am going via Cavendish, I have not seen before. Not clear if dividends are allowed for though...

C

dunstonh

Do they allow for dividends in Acc funds?

To be honest, I havent checked. I always use income units.

Chickereeeee

dunstonh wrote: »

To be honest, I havent checked. I always use income units.[/QUOTE

Very wise....

C

masonic

Chickereeeee wrote: »

I am sure it has been covered before, but I cannot find an exact match to this case. Can anybody provide me with the correct calculation, please?

It was discussed quite a long time ago in relation to a certain iShares ETF that is accumulative. After much groaning an extolling of the virtues of investing in distributing assets outside of tax shelters, I believe the process essentially involved the following:

1) Look up the nominal income figure for each distribution period since you started holding the units/shares in question, along with the number of those units/shares held at the nominal ex-dividend date (hopefully records from places like Trustnet will go back far enough, otherwise you'd need to get the information from the fund manager).
- for open ended funds, if you need a figure for income as well you will need to get information from your platform in respect of any Group 2 units (those bought during the distribution period) as to the income/equalisation split. Equalisation can be deducted from the income calculated in (2) below.
2) Calculate the nominal income [and equalisation] earned for your holding using the nominal income, number of [Group 1 + Group 2] units/shares for each distribution period, then deduct this from the overall gain to arrive at the capital gain.

When your eyes uncross, repeat for each of your other holdings.

wakeupalarm

dunstonh wrote: »

To be honest, I havent checked. I always use income units.

Chickereeeee wrote: »

Very wise....

I have seen this mentioned before but never really understood, why is it preferred to use income rather than accumulation units even if revinvesting?

Chickereeeee

wakeupalarm wrote: »

I have seen this mentioned before but never really understood, why is it preferred to use income rather than accumulation units even if revinvesting?

See the above for the *&%*&! calculations you need to go through to work out cap cains for a start. If you are in funds on a platform with no transaction charge (and fairly large transactions, over CGT limit) inc funds seem to make life simpler.

C

Malthusian

Chickereeeee wrote: »

Do [platform CGT calculators] allow for dividends in Acc funds?

All the ones I have used do.

Which follows on to the question about why use Acc units - I do if the platform has a reliable CGT calculator as it makes the transaction history considerably easier to read without a constant stream of reinvested dividends cluttering it up. And depending on platform it may reduce transaction charges and paperwork (if your platform has a habit of generating contract notes every time there is a new purchase no matter how small - *cough* Fidelity).

But as others have said, this turns from a blessing to a curse if you don't have a CGT calculator and need to know what dividends were paid. If the platform doesn't have one I would use Inc units where possible.

I have used Fidelity, YouInvest and iWeb (and HL in the past) but I have only ever seen a 'cost' column (which I believe is based on unit price alone), and which can be lost when transferring between platforms.

I think Fidelity's CGT reports include reinvested dividends although I haven't used it in years. The others I can't speak for. If you keep a record of how much you initially paid it should be fairly easy to check (as the base cost with reinvested dividends will be a few percent higher than the amount you paid). Some platforms' calculators allow you to click through and look at the full transaction history including dividends.