Woodford tax question

lollynerd

Hi all,
I have a small portion of a Fidelity SIPP held in Woodford equity income.
These are now being returned to me due to the closure of the fund.
I have the option of buying alternative funds in the SIPP or cashing out.
Does anyone know, if I buy new shares,
a) Will HMRC view that I have taken tax income and then reinvested. i.e. will the value of the Woodford investment be deemed to be taxable this year?
or
b) Will HMRC take the view that I never actually took any pension earnings from the fund?
I hope the question makes sense.
Thanks

bowlhead99

lollynerd wrote: »

Hi all,
I have a small portion of a Fidelity SIPP held in Woodford equity income.
These are now being returned to me due to the closure of the fund.
I have the option of buying alternative funds in the SIPP or cashing out.
Does anyone know, if I buy new shares,
a) Will HMRC view that I have taken tax income and then reinvested. i.e. will the value of the Woodford investment be deemed to be taxable this year?
or
b) Will HMRC take the view that I never actually took any pension earnings from the fund?
I hope the question makes sense.
Thanks

The cash from Woodford will be returned to the cash account within your SIPP for you to reinvest as you please. Your SIPP is a pension. If you leave it in your pension you haven't taken any income from your pension.

You could draw it out from the pension back into the 'real world' as income it you want, so that it leaves the tax wrapper and counts as income. But if you reinvest that cash without it ever leaving your pension and coming back to your personal bank account, you haven't received any income. It's still in your pension.

So (b) is the case.

Aretnap

If it's in a pension then it it will be taxed as income when you withdraw it from the pension (subject to the 25% tax free portion etc etc) and get it into your hands, or a non-pension bank account. Unless and until you withdraw it HMRC don't care what you have it invested in or whether you gain or lose money on those investments, or how many times you've changed funds within the pension. They just care about the amount of cash you put in and the amount you take out. (And possibly the value of the whole pot at certain points if you are over the lifetime allowance, but one advantage of investing in Woodford is that you are less likely to have to worry about the lifetime allowance).

So no its not a taxable withdrawal unless you actually withdraw the funds.

AnotherJoe

When you say "cashing out" do you mean take the cash out of the SIPP? How old are you?
If the money goes back into teh SIPP and you buy soemthing else with it or leave it as cash i cant see why there woudl be any tax its no different to selling any other shares within a SIPP.

lollynerd

Thanks for the swift replies.
This was what I was hoping for.
Cheers