CSH2 - income or capital gains ?

Ciprico

Looking on the web I can't find a definitive answer, I am looking for "something" to park some cash in a general account. I don't currently use any of my capital gain allowance, so if CSH2 gains are capital that would fit the bill.

eskbanker

Not sure I'm understanding the question - under what circumstances would an increase in the value of a holding be regarded as anything other than capital gains?  Or are you perhaps asking about how income from it would be treated?

EthicsGradient

The ETF says it does not pay out distributions, so there isn't income in that sense; the KPMG site where the ETF reports any Excess Reportable Income (which is subject to income tax, not capital gains) has, for the past few years:

11/2017-10/2018 (distribution date 30/4/2019): £4.3959/unit (price then: about £1024, so 0.43%)
30/4/2020: £6.5820 = 0.64%
30/4/2021: £2.3578 = 0.23%
2022 and 2023: £0 ERI.
So it looks like they've structured it so that any increase is capital gain, in recent years.

Ciprico

Hmm, this site says Royal London MMF (similar to CSH2)  is taxed as income. 

https://community.hmrc.gov.uk/customerforums/pt/90a8a3d4-5338-ee11-a81c-002248c8750a

I think I'll just buy short dated Gilts to avoid the issue, and keep MMF in ISA/sipp

eskbanker

Ciprico said:

Hmm, this site says Royal London MMF (similar to CSH2)  is taxed as income. 

https://community.hmrc.gov.uk/customerforums/pt/90a8a3d4-5338-ee11-a81c-002248c8750a

I think I'll just buy short dated Gilts to avoid the issue, and keep MMF in ISA/sipp

That HMRC forum thread simply states that distributions will be taxed as income, because they are income, but doesn't comment on the fact that capital growth will be subject to CGT.

GeoffTF

If I remember correctly, CSH2 uses swaps with Société Générale as the counter-party, rather than direct lending. I expect that they are taxed as capital gains, but I doubt whether HMRC is happy about that. Nonetheless, you should be able to rely on the reported Excess Reportable Income.