Can I claim a capital loss on a Neil Woodford Fund held in a Fund and Share Account and/or SIPP?

jaygibbs

I have held Neil Woodford's Equity Income fund in both a Fund and Share Account and SIPP on the Hargreaves Lansdown investment platform and wondering if the losses made in both my Fund and Share account and/or SIPP can be claimed as a capital loss on my tax return.

xylophone

https://www.gov.uk/capital-gains-tax/losses

Linton

Your SIPP does not form part of your tax return, a pension is an entirely different "person" to you. Simlarly for an ISA.

Old_Lifer

If your investment is sheltered from tax  it works both ways.     A gain is ignored for tax purposes   and  a loss is also ignored.

jaygibbs

So I can claim a loss on my fund and share account as its not sheltered from tax, but the same it not true on a SIPP/ISA.

Prism

Correct. As you are not paying tax on your SIPP/ISA you can't claim a tax loss. Fund and share account you can.

bowlhead99

The assets held in your SIPP are not subject to capital gains taxes - your pension fund does not pay UK tax on its investments gains and losses. So you can't claim a capital loss from the SIPP's investment in WEIF against a tax bill, just like you wouldn't be expected to pay capital gains tax on a profit whenever your SIPP makes one.  

As you will have lost money in the pension on this investment there is less money in the pension than there would have been if the losses hadn't been made - so unless you make profits on other investments you will ultimately have a lower amount of money in the pension, so will take lower income drawdowns out of the pension, so will pay less income tax when you draw it.   That's the only way the investment loss inside the SIPP will save you any tax. 

For the money you lost on your investment in the Fund & Share account, which does not have any tax wrapper around it, then yes your losses can be offset against gains made in the same tax year or carried forward for future years if you have a net loss overall. Even if there is no tax to pay, it is worth telling HMRC because you can't use them in future years if you never told HMRC that you had them.

As part of the liquidation, you would have had a portion of the value distributed to you near the end of last tax year (2019/20) - capital distributions in January and March - and you will have received more distributions this year (2020/21) and may have a little bit more next year.  The technically correct thing to do for a large capital distribution would be to treat last year's payments (e.g. where they made a distribution of 74% of the price at 24 Jan 2020, although you still kept all your shares) as a partial disposal of that percentage of your Fund & Share Account's holding in the fund at that point.

So if 80% of the total value was distributed last tax year you would split your units pro rata 80:20 and compare the payout for the 80% of with the acquisition cost of 80% of the units (presumably as it's a taxable account you had been tracking your allowable cost), and this would allow you to figure out your loss for that 'deemed disposal' or capital return.  Then the shares you have left (even though it's the same quantity of shares as you had all along) would carry forward tied to the remaining 20% of the original cost, to be compared against later distribution proceeds which you receive in a few chunks during 2020/21 or 2021/22 or beyond, and probably make more loss then too.  Effectively then, you would make losses on the Woodford fund across at least two separate tax years.

If the amounts received in January and March's capital distributions were both 'small' (i.e. under £3k) and less than your carrying cost of the shares, then HMRC will allow you to take a simpler approach if you want, and not bother to treat it as a deemed disposal - simply knock the value of the capital distributions received off the allowable costs for all of your shares in the fund, so that you have a lower carrying cost going forward. So for example if the investment had cost £5k and you got £2k back between Jan and March, then you could just say your investment had cost a net £3k, keeping it simple.  Then when you get the final distribution (either in 2020/21 or 21/22 or whenever it is), and the final proceeds turn out to be less than the £3k you are carrying as your cost, you will have made a loss, and can claim it all for that tax year. 

You own tax situation and the amounts involved may impact whether you can use the 'small capital distribution' method and whether it's more advantageous for you to do that. It saves some maths, if you can, but it means the losses won't get recognised until a later point.

I made some comments on this on a thread back in January (https://forums.moneysavingexpert.com/discussion/comment/76777947#Comment_76777947)   The 80:20 mentioned above is just my quick guesstimate without doing the exact maths - seems to be about 79% of the Acc funds' value in late Jan was paid out across the first two capital distributions in Jan and March - but the fund administrator or your investment platform would have the historic NAV information to know what was proportion of NAV was paid out in those two events, if you need it for your calculations.


* edited for typos