OEIC funds and Capital Gains Tax treatment advice

DH84A

I currently have two OEIC's which I am in the process of drawing down to fund my ISA. I have over this tax year taken out nearly up to the £12,300 yearly CGT limit on one of them (and a smaller withdrawl from the same one last tax year), and will start to draw the other OEIC down next tax year when it changes to the new £6000 limit.

I think I'm right in saying that as these are different funds even though from the same provider (one is balanced growth, and the other is strategic) that they are treated as separate OEIC's/assets for CGT, and each is entitled to the £12,300 CGT gain threshold? and that taking out the money from just one is OK when working out the CGT (no withdrawls have been made from the other one), and that I didn't have to include the other OEIC in my calculations for the CGT? I was also thinking that If I have this right then could I in theory take out up to the max from the second OEIC as well this tax year?, as from my online research I think you can take no more than 4x£12,300 = £49,200 (4x different assets) in one tax year.

If I have got this horribly wrong and both funds are classed as just one OEIC then I will have to check my figures and see if I owe HMRC anything! Any advice would be very much appreciated, as its a bit of a minefield!

eskbanker

CGT liability is based on total chargeable gains over each tax year, so if you dispose of any permutation of assets that result in a total gain of up to £12,300 this year then you pay no CGT....

If that doesn't answer your question, have another go at phrasing it!

DH84A

Thanks for the reply eskbanker, that makes sense, at the moment I have withdrawn from the one fund just enough to keep under the threshold of £12,300 for this year (deliberately under to give me a buffer just to be on the safe side), and that was my plan, with an end to eventually closing it next tax year, then start to draw down the other and I was happy with that, however a concern that just popped in to my head was whether both funds are treated as one asset if that makes sense, I think from what I can glean, is that for CGT purposes different funds from the same provider are taken as being separate OEIC's? If not and they are treated as one asset I'll need to recalculate my total gain made on both funds to check if what I've disposed of is still within the allowance after the disposal if that makes sense? Apologies if this is long winded and may not make total sense but as you've probably guessed this is not my forte!

eskbanker

Different funds from the same provider are indeed regarded as separate for CGT purposes, but that's only relevant when calculating averaged acquisition costs - it doesn't give you twice the allowance, which is what you appeared to be suggesting originally.  So, if you're just selling enough units of fund A to crystallise a gain of £12,300, the valuation of fund B plays no part in this, but if you're selling units in both funds (in the same tax year) then you need to ensure that the total gain is no more than £12,300.

DH84A

Thanks again eskbanker, that confirms what I thought originally regarding the funds, I've only taken just below the allowance threshold from one fund this tax year, so I will start withdrawing again next year as per my original plan. Apologies for the confusion, the only reason I asked regarding the 4x£12300 was that I'd seen that somewhere else whilst searching online for info, and it seemed far to good to be true when I read it, which it obviously was! Thanks for your answer, much appreciated.

eskbanker

DH84A said:

Apologies for the confusion, the only reason I asked regarding the 4x£12300 was that I'd seen that somewhere else whilst searching online for info, and it seemed far to good to be true when I read it, which it obviously was!

That relates to the threshold for reporting gains if you self-assess:

https://www.gov.uk/capital-gains-tax/work-out-need-to-pay

If your total gains are less than the tax-free allowance

You do not have to pay tax if your total taxable gains are under your Capital Gains Tax allowance.

You still need to report your gains in your tax return if both of the following apply:

• the total amount you sold the assets for was more than 4 times your allowance
• you’re registered for Self Assessment

DH84A

Ah, that's where the wires have crossed regarding the 4x of the allowance, thankfully its no where near that, I should have read it more carefully!

MX5huggy

Can I check you understand the Capital Gains tax is a tax on the gains, your wording sounds like you’re taking £12300 out of the investment because that is the tax free threshold. I would expect you to need to take out much more to use up £12300 of allowance. If your investment had doubled in value you would need to withdraw £24600. 

DH84A

Hello MX5Huggy, again its probably how I've phrased it, yes I have withdrawn considerably more than £12,300 to arrive at just below the £12,300 allowance made on the gain, sorry for the confusion.