Selling and rebuying shares to avoid CGT

furpho

For the next few years I will have shares in a GIA while I drain them into my sipp and isas.  To take advantage of my CGT annual allowance I know I can sell and rebuy the same fund or reinvest in 'another class'.   It's the class bit I don’t understand.  Can I quite simply sell my hsbc all world tracker shares and immediately reinvest in a different all world fund or etf tracker?  Do the trackers have to be different or are there any other 'gotcha's' I should know about?

furpho

Edit....I left out that i'm aware of the 30 day rule.  I wish to rebuy immediately and i see most world trackers as much of a muchness...

masonic

Yes, your understanding is correct. You just need to reinvest into a different financial instrument, which could be an equivalent fund from a different provider (HSBC to Blackrock), a different unit class of the same fund (Acc to Inc, Class B to Class I units, etc), or an equivalent fund of a different type (OEIC to ETF, etc). If the funds have different ISIN codes, then they will not be matched for the purposes of the bed and breakfast rules. Given the reduction in CGT allowance, this is becoming a less useful strategy.

Linton

furpho said:

For the next few years I will have shares in a GIA while I drain them into my sipp and isas.  To take advantage of my CGT annual allowance I know I can sell and rebuy the same fund or reinvest in 'another class'.   It's the class bit I don’t understand.  Can I quite simply sell my hsbc all world tracker shares and immediately reinvest in a different all world fund or etf tracker?  Do the trackers have to be different or are there any other 'gotcha's' I should know about?

Yes it would be a CGT-liable transaction if you sell one tracker and buy a different one (even if it invests in the same index) and so covered by the CGT allowance.

"Class" refers to funds that are identical except for the charges.  Generally individual platforms only sell one class of any particular fund - the one with the lowest charges that the fund manager is prepared to let them sell which will depend on the level of business.

dunstonh

  To take advantage of my CGT annual allowance I know I can sell and rebuy the same fund or reinvest in 'another class'

Switching between share classes will not utilise your CGT allowance.  This includes inc/acc unit switches.

 Can I quite simply sell my hsbc all world tracker shares and immediately reinvest in a different all world fund or etf tracker?

A different asset would be a disposal for CGT purposes.

  Do the trackers have to be different or are there any other 'gotcha's' I should know about?

It has to be a different asset.   Not a different share class of the same asset.   What the asset invests in doesn't matter.   So, HSBC to Fidelity  is fine.  Whereas HSBC Class C inc to HSBC class C Acc would not be.

masonic

dunstonh said:

  To take advantage of my CGT annual allowance I know I can sell and rebuy the same fund or reinvest in 'another class'

Switching between share classes will not utilise your CGT allowance.  This includes inc/acc unit switches.

It is important to make the distinction between "switching between share classes" also known as a "conversion" (which is a share reorganisation by the fund house with the units being directly exchanged), vs placing separate orders to sell one unit class for cash and buy another unit class for cash, which is not a share reorganisation. The latter would utilise your CGT allowance whereas the former would not.

dunstonh said:

It has to be a different asset.   Not a different share class of the same asset.   What the asset invests in doesn't matter.   So, HSBC to Fidelity  is fine.  Whereas HSBC Class C inc to HSBC class C Acc would not be.

Again not the case unless being performed as a direct exchange of units, where it would constitute a share reorganisation. A separate sale of one instrument and subsequent purchase of the other would be fine.

There is a long and very useful discussion of this point here: https://forums.moneysavingexpert.com/discussion/5500004/bed-breakfast-vls80-vls100

dunstonh

masonic said:

dunstonh said:

  To take advantage of my CGT annual allowance I know I can sell and rebuy the same fund or reinvest in 'another class'

Switching between share classes will not utilise your CGT allowance.  This includes inc/acc unit switches.

It is important to make the distinction between "switching between share classes" also known as a "conversion" (which is a share reorganisation by the fund house with the units being directly exchanged), vs placing separate orders to sell one unit class for cash and buy another unit class for cash, which is not a share reorganisation. The latter would utilise your CGT allowance whereas the former would not.

dunstonh said:

It has to be a different asset.   Not a different share class of the same asset.   What the asset invests in doesn't matter.   So, HSBC to Fidelity  is fine.  Whereas HSBC Class C inc to HSBC class C Acc would not be.

Again not the case unless being performed as a direct exchange of units, where it would constitute a share reorganisation. A separate sale of one instrument and subsequent purchase of the other would be fine.

There is a long and very useful discussion of this point here: https://forums.moneysavingexpert.com/discussion/5500004/bed-breakfast-vls80-vls100

All fair comment.   My wording was lazy.  It would be worth checking the platform in question whether they use conversions or distinct sell and buys.   

furpho

Thank you very much for the replies.  This leads on to my next question (which may be better off in a new thread).  I'd like to carry on using accumulation etf's but realise this may be more difficult when it comes time to calculate tax.  On an Acc fund how do I identify the notional distribution?  Not sure if this is a platform specific issue (im on II).

masonic

furpho said:

Thank you very much for the replies.  This leads on to my next question (which may be better off in a new thread).  I'd like to carry on using accumulation etf's but realise this may be more difficult when it comes time to calculate tax.  On an Acc fund how do I identify the notional distribution?  Not sure if this is a platform specific issue (im on II).

Normally you would need to go to the fund provider's website and they will have the information in a report. Often a separate document for each year. Even distributing ETFs may have Excess Reportable Income that is taxable as dividend income and can therefore be deducted from your capital gain. To avoid the headache completely, you could opt for a distributing OEIC, as all the income would be paid out to your account.

EthicsGradient

furpho said:

Thank you very much for the replies.  This leads on to my next question (which may be better off in a new thread).  I'd like to carry on using accumulation etf's but realise this may be more difficult when it comes time to calculate tax.  On an Acc fund how do I identify the notional distribution?  Not sure if this is a platform specific issue (im on II).

Vanguard provides spreadsheets with the details of the ERI for their ETFs here: General Account tax return Information | Vanguard UK Investor (vanguardinvestor.co.uk)
Invesco has links to tables of past ERI figures on information pages for each ETF.
Several other providers publish the ERI for their ETFs on a website run by KPMG - you sign up for free as a private investor: KPMG reportingfunds.co.uk (on that, I find it easiest to find an ETF using the ISIN number - the precise name can change a bit from year to year, and isn't always matched)
These will be shown as ERI per share, in the currency the ETF uses, so you have to know how many shares you owned at the end of the reporting year. The notional distribution date is then 6 months later (eg if the reporting year is Dec 1st 2022 to Nov 30th 2023, the date on which it is counted as "received" for tax purposes is 31st May 2024, so in the 2024-25 tax year).