Does Consolidated Tax Certificate need extra book-keeping?

bobfredbob

Does a Consolidated Tax Certificate from a non-ISA stocks & shares account provide all the information I need to easily fill in a self assessment form? Or do I need to keep any additional book-keeping for when I buy/sell, have dividends, die?

I’m mainly interested in a “Vanguard Life Strategy” which is an "OEIC registered in England", but I’m interested in any other complications before I make a non-ISA purchase. This will be held in an “Interactive Investor” account (not Vanguard’s own account) since my ISA is already with II and is currently maxed out.

I'm interested in putting the money aside for many years to pay towards children's uni fees, but don't want to put in a junior ISA in case the money is needed sooner for some other reason.

Thanks in advance.

bowlhead99

The consolidated tax certificate is generally all about giving you the income information (dividends, interest, property income distributions), whether received from shares or bonds or distributing investment funds or UK accumulating investment funds.

Typically, these annual tax statements don't tell you anything about capital gains (difference between what you sold shares for during the tax year and what you paid for them - taking into account the value of reinvested dividends along the way as part of the cost of the shares you are now selling), although some brokers will have a go at it.

The brokers / platforms don't generally provide you with that capital gains info because they don't control all the data (for example they may be holding a fund for you which you bought via someone else and they don't know what you paid for it, or you might have more holdings of the same share / fund elsewhere which need to be pooled together under the matching rules for CGT etc) so they would have to say the figures were just an assumption. Whereas with the income tax side they can be certain that you earned what they say you earned, because it's based on data given to them by the funds/ companies in which you invest.

Income from investments forms part of your self-assessment, but you only need to include capital gains information in your self-assessment forms or calculations in the year in which you made a disposal. So if you are buying now to fund university years, you won't be reporting it most years because you won't have any reason to do any selling. However, tracking the cost for tax purposes is still important - so that you have it to hand when you do eventually sell, and if the amounts are large you might need to split the sales across multiple tax years to make sure the gains fit inside your annual exemptions.

If you die, no issue, because no CGT arises on death. Well, dying might be an issue for you personally of course, but your gains on assets held at that point will escape capital gains tax so your executors won't need to have tracked the detail of what it all cost.

bobfredbob

Thanks. That makes sense about why they can't calculate a definite CGT figure.

When I sell, if the total sale price for a year happens to be below CGT, I can file zero on my tax return, with no difficult calculations/no need to show workings (since gain would also be below CGT threshold, assuming no other CGT-able sales).

Otherwise, I'd need to follow the HMRC "section 104" to calculate the price, check the actual profit made, and then declare it if it exceeds CGT threshold.

The consolidated tax statement has details of how much I need to declare each year on my tax return for dividends/interest.

I'd need to keep a spreadsheet to track dividends being effectively reinvested. So, I'd have a line saying "initially purchased 1000 shares @ 500p with broker fee of 9.99". If it were an income fund, I might record "reinvest dividend at 1 share @ 520p", but I'm not sure what info I'd get from a non-ISA account for recording the value of the reinvested dividend to update the "pool of cost".

Also, the HMRC website says I can deduct stockbroker fees from the CGT. Presumably this is just the share dealing fee for purchase and sale, and I can't include a proportion of the "we charge x% to keep your account" fees that some brokers charge.

Reaper

I gather some brokers do provide CGT figures. It annoys me mine doesn't.

CGT can be really hard for the average investor to work out as if you buy and sell the same fund multiple times with varying amounts plus reinvested dividends it is a nightmare for work out what the buy price was. However it is a set of rules which lend themselves to a computer program giving you the answer. The broker has all the figures.

I take on board Bowlhead's point there might be external factors which could affect it but I don't feel that's a good enough excuse for not providing them to cover the 99% of cases where they would be correct.

talexuser

iWeb show the average purchase price of your shares which gets updated with reinvested dividends, so it is relativeluy easy to work out gains when selling, though you need to keep tabs on purchse/selling costs.

I seem to remember you have to declare all sales, even if no CTG is liable, if the total is 4 times the limit, so over £48k.

bowlhead99

bobfredbob wrote: »

When I sell, if the total sale price for a year happens to be below CGT, I can file zero on my tax return, with no difficult calculations/no need to show workings (since gain would also be below CGT threshold, assuming no other CGT-able sales).

Otherwise, I'd need to follow the HMRC "section 104" to calculate the price, check the actual profit made, and then declare it if it exceeds CGT threshold.

If the total proceeds is below the CGT exemption, the profit will definitely also be below the exemption, so no need to declare anything - unless you made a net loss from your sales in the year and you want HMRC to be aware of it so that you can offset it against gains in future years.

If the total proceeds in a year is over the CGT annual exemption, you should calculate what the gain was, to be able to prove that your gain was all covered by the exemption - or if it wasn't, how much of the gain isn't exempt and will attract a tax charge. If the gain was less than the exemption resulting in nothing to pay, you only have to declare it if you're doing a tax return and the total proceeds in the tax year exceed 4x the annual exemption.

But either way, you should still keep records to support your position that there's nothing to declare. If for some strange reason a future government decides they want to reduce the exempt amount to £5000 instead of £12000, it won't be much of a defence to say "oh I never kept records of my costs because I assumed I'd never need them", so you may need to err on the side of caution and perhaps pay more tax than would have strictly been necessary if you had known your actual numbers.

The consolidated tax statement has details of how much I need to declare each year on my tax return for dividends/interest.

I'd need to keep a spreadsheet to track dividends being effectively reinvested. So, I'd have a line saying "initially purchased 1000 shares @ 500p with broker fee of 9.99". If it were an income fund, I might record "reinvest dividend at 1 share @ 520p", but I'm not sure what info I'd get from a non-ISA account for recording the value of the reinvested dividend to update the "pool of cost".

Your consolidated tax statement should also include your share of the received and undistributed income from accumulation share classes of open ended funds (assuming they're UK funds - the platform may not receive it for some investment types like foreign domiciled ETFs). So you can add that income to your cost records at the same time as you include it in your income tax calculation.

Also, the HMRC website says I can deduct stockbroker fees from the CGT. Presumably this is just the share dealing fee for purchase and sale, and I can't include a proportion of the "we charge x% to keep your account" fees that some brokers charge.

In this context to get the 'allowable costs of purchase' or 'net proceeds of sale' for your CGT calculations, the fees they mean are 'transaction costs' for buying and selling a share or fund. This includes things like a £1.50 transaction fee, or a £9.99 transaction fee, or a £30 transaction fee - whatever your broker or platform charges for the transaction - or stamp duty paid by you, or a foreign currency exchange commission - which are all things you might need to pay when completing the transactions to buy or sell.

It doesn't include whatever you choose to pay a broker or fund platform to hold your assets for the period you own them and administer your account, provide reports, etc etc

So if platform A charges x% ongoing per year with as many transactions as you like for free, and platform B charges y% ongoing per year plus £a per transaction, and platform C charges £100 per year allowing up to 10 transactions at no extra charge and £b per transaction afterwards... only the £a or £b actually paid will go onto your CGT calc.

bobfredbob

Thanks everyone.

One final question, say I open the non-ISA account and in a few years want to transfer to some other broker with lower fees (who has the same funds available on their platform).

In my mind, "transfer" suggests there is just some work between the brokers to say I used to own X on platform A, and now I own X on platform B, and I just keep my spreadsheet as it is, though the new broker might lose the "average price" history calculations.

However, looking at some broker webpages they say "you're out of the market" during the transfer. I guess they're just being careful that you might lose a day of trading, or it could mean that behind the scenes they might be doing a sell on A, transfer cash to B, then broker B does the re-purchase.

Assuming I don't transfer around end of tax year, are there any complications with transferring?

bowlhead99

bobfredbob wrote: »

One final question, say I open the non-ISA account and in a few years want to transfer to some other broker with lower fees (who has the same funds available on their platform).

In my mind, "transfer" suggests there is just some work between the brokers to say I used to own X on platform A, and now I own X on platform B, and I just keep my spreadsheet as it is, though the new broker might lose the "average price" history calculations.

You are right that if you transfer 'in specie' -i.e. just flip between platforms so that you are still the owner of the shares/units with a different platform holding them for you - there isn't a disposal. There would be a disposal if you redeemed out on one platform, asked the platform to transfer the cash to the new place, then subscribed back into the fund from the new account using the cash. The latter (a cash transfer) would result in you being out of the market because if there were gains or income in the meantime, you would miss out on them, because you don't own any shares.

However, looking at some broker webpages they say "you're out of the market" during the transfer. I guess they're just being careful that you might lose a day of trading, or it could mean that behind the scenes they might be doing a sell on A, transfer cash to B, then broker B does the re-purchase.

If you ask for a transfer of the holdings, not via cash, you are in the market (i.e. you keep your exposure to the ups and downs of the markets) but you lose access to the market for a period. For example you say you want a transfer, so then your old platform says, ok we've got this transfer request and we're processing it, so you can no longer sell this holding because it's going to be out of our hands now and your account is being closed ; and likewise the new platform says, the process has been started but we haven't got your shares yet so we can't accept a sell order yet. Then this drags on for weeks or months...

That's fine if you want to keep the holdings long term of course. A cash transfer will be quicker (usually easily done in a matter of days), but always creates a taxable event. You might of course be happy to create a taxable event and effectively cash in some profits and use up some of that year's annual CGT exemption to avoid having a bigger gain build up.

If you say you want to transfer 'in specie' (the holdings themselves), they shouldn't move it in and out of cash in the background because that would create a CGT event which you never agreed to do.

Assuming I don't transfer around end of tax year, are there any complications with transferring?

The most annoying complication or reason for delay is when the fund you are transferring is one that your new platform offers but you are holding a special 'share class' of that fund with slightly different attributes (e.g lower management fee, different minimum subscription etc) which is exclusive or semi-exclusive to the platform you are already with, and the new platform hasn't agreed with the fund manager to be allowed to let their clients hold it.

Then you have to do some awkward dance with the platforms where the shares need to be converted to a class of the same fund that the new place can accept. If the old platform doesn't support the new share class or the new one doesn't support the old share class, you can be in some sort of stand-off limbo where the old platform doesn't want to 'convert' it before transferring and the new one can't receive it and convert it after transferring, and the old platform doesn't really want to lose your business anyway so isn't incentivised to hurry it up.

To avoid delays it can just be easier to sell out yourself on the old platform and move the cash and buy in again, accepting a short time out of the market. Or sell out an buy some other fund that they do both deal in, temporarily, and then you can transfer that other fund without spending a week out of the market, and then change back to whatever fund you really wanted. But of course those things involve taxable events, if it's not a straight 'conversion' from one class to another performed by the fund manager (a conversion is treated as a 'reorganisation' of the fund's capital, and isn't a taxable event).

HTH.