CGT calculation for funds transferred

flopsy1973

Hi 
can someone confirm if I am working this CGT out right please. My late parents left me their funds years ago and now I am selling the funds do i calculate the CGT from the price when they were transferred over to me as cost price 
thanks

eskbanker

Yes, the acquisition price for CGT purposes is the price at the time you acquired the assets....

Thrugelmir

Probate value is your base cost. 

flopsy1973

what about if its a ACC fund and has extra units added to it over the years 

eskbanker

flopsy1973 said:

what about if its a ACC fund and has extra units added to it over the years 

If you've bought more after inheriting then you need to use the actual acquisition cost for each of those purchases (from the contract notes), assuming you're not using a tax wrapper of course....

ColdIron

flopsy1973 said:

what about if its a ACC fund and has extra units added to it over the years 

Acc funds do not have units added, the value of the units is increased by the value of the retained dividends. This has no effect on capital gains

Of course if you are purchasing extra units (regardless of Acc or Inc) it will

ColdIron

Your cost is your cost and doesn't change over time. The unit price will increase reflecting the retained dividends. When you come to sell you should deduct the dividend (or part thereof) from the sale proceeds. Imagine you had bought Inc units where the dividends had been paid out. The capital gain would be the same on sale as the Acc units with dividends deducted

ColdIron

I suppose you could just think about it as deducting the dividends from the gain if you like and ignore the method. The value will be the same

But in reality the base cost does not change, dividends are a benefit and not a cost. The unit price will increase by a combination of organic growth in the underlying holdings plus the dividend so from an accounting point of view you would deduct them from the sale proceeds

Edit: I wonder if you are thinking about Equalisation which does in a very real sense affect the base cost of Inc units with the return of capital

EthicsGradient

From the HMRC point of view, which is what counts, you add them to the cost.

If you hold accumulation units you will not receive distributions of income from the trust. Instead, the income is retained and reinvested automatically for you (a ‘notional distribution’). You do not receive any new units, but the value of your existing units is increased. If you receive notional distributions which are subject to Income Tax, you’re allowed the amount of these distributions as additional expenditure on your accumulation units.

https://www.gov.uk/government/publications/shares-and-capital-gains-tax-hs284-self-assessment-helpsheet/hs284-shares-and-capital-gains-tax-2017

So when you work out the amount you receive for a sale, to see if it exceeds 4 times the capital gains allowance (which makes it reportable, whether or not your net gain is over the allowance), it's just the sale proceeds you use in the calculation, not deducting anything from it for accumulated distributions.

flopsy1973

thanks for that at the time they were transferred to me they had cost value of 6720 for 987 units 
today the cost is 11332 for 1538 units increased by the dividends but with value of 11164 so a small loss on it now 
so for the CGT do is still use the base cost of 6720 is how i read the above. Also the below in bold about 4 times the allowance never heard of this before ?????? thanks 

So when you work out the amount you receive for a sale, to see if it exceeds 4 times the capital gains allowance (which makes it reportable, whether or not your net gain is over the allowance), it's just the sale proceeds you use in the calculation, not deducting anything from it for accumulated distributions.

eskbanker

flopsy1973 said:

thanks for that at the time they were transferred to me they had cost value of 6720 for 987 units 
today the cost is 11332 for 1538 units increased by the dividends but with value of 11164 so a small loss on it now 
so for the CGT do is still use the base cost of 6720 is how i read the above.

No, if you're disposing of 1538 units then the base cost for the original 987 is the £6.81 each, but you need to identify the purchase cost for each of the subsequent 551 units when calculating your CGT liability.  If you've been buying these extra units by reinvesting dividends then that would suggest an inc holding rather than an acc one, and your dividend reinvestment contract notes will convey the cost to be used for each, although if the £11,332 figure has been supplied by your platform as an accurate representation of the CGT-compliant purchase cost of your entire current holding then you shouldn't need to recalculate it from the ground up yourself.

flopsy1973 said:

Also the below in bold about 4 times the allowance never heard of this before ?????? thanks 

So when you work out the amount you receive for a sale, to see if it exceeds 4 times the capital gains allowance (which makes it reportable, whether or not your net gain is over the allowance), it's just the sale proceeds you use in the calculation, not deducting anything from it for accumulated distributions.

Yes, sale proceeds, but irrelevant for the value in the given scenario, where these are below one year's CGT allowance.