Tax treatment on dividends

Johnnyboy11

Thanks Bowlhead99, appreciated, but I'm still at a loss...
In a given tax year, if I sold ACC Units between the Ex. Div. date and Paid date, then why not include the Ex. Div figure as a cost in the CGT calc.?

bowlhead99

Johnnyboy11 wrote: »

Thanks Bowlhead99, appreciated, but I'm still at a loss...
In a given tax year, if I sold ACC Units between the Ex. Div. date and Paid date, then why not include the Ex. Div figure as a cost in the CGT calc.?

Has the income appeared on a tax voucher or consolidated tax certificate issued by your platform provider? If so, you should include that income that you know you have received and reinvested, increasing the costs of the units you sold.

If the income hasn't appeared in a tax voucher (because no income has been 'paid', because the payment date wasn't reached), then how could you say your cost of investment should be increased for the reinvested income, reducing the gain in your CGT calc?

Tom99

Johnnyboy11 wrote: »

Thanks Bowlhead99, appreciated, but I'm still at a loss...
In a given tax year, if I sold ACC Units between the Ex. Div. date and Paid date, then why not include the Ex. Div figure as a cost in the CGT calc.?

Whilst I can see some logic in using the ex-div date for CGT the tax treatment has to line up with the relevant date for income tax which is the paid date otherwise you would have a situation where the dividend was paid free of both CGT and income tax.

Look at it this way - on the declared div date the company sets aside the dividend it has declares, on the ex-div date nothing actually happens other than the person owed the dividend is 'fixed' and for INC unit holders the total value is split into a reduced price plus a separate dividend, for ACC unit holders the unit price still reflects the dividend still to be paid (as it did the day before).
On the paid date the company actually pays out the dividend to INC unit holders and fully incorporates the dividend into the unit price for ACC unit holders as share holdings rather than cash.

Your case for using the ex-div date for CGT is somewhat supported by the fact that if you sell a property then the exchange of contracts date is the relevant date for CGT not the completion date. Very similar to an ex-div date on which a company promise to pay you the div.