CSH2: taxation and performance

itwasntme001

I haven't been following this closely but want to ask whether my very brief period of owning CSH2 has a different tax treatment compared to what I had thought?

I held it for a week or so in June this year and thought the treatment of the gain falls under capital gains tax?

aroominyork

itwasntme001 said:

I haven't been following this closely but want to ask whether my very brief period of owning CSH2 has a different tax treatment compared to what I had thought?

I held it for a week or so in June this year and thought the treatment of the gain falls under capital gains tax?

You're OK. Unless you hold it on a reporting date - 31/10/24 or 30/9/25 - ERI doesn't affect you and you can just report the capital gain like you intended.

aroominyork

masonic said:

Think yourself lucky you aren't held to the ministerial code.

Wiffle waffle. I might not appear to be the chap I actually am. Used to be. Still am a chap of some sort.

LateGenXer

aroominyork said:

I wonder if we can coax LateGenXer back to give a view...

I haven't replied because I'm at a loss as what to do at this moment... 

If Amundi says it's dividend, and HMRC says to follow the fund manager guidance, my first take would be to follow Amundi's indication (regardless my own interpretations of the legistlation as I'm not a financial/tax adviser myself, so I rather not 2nd guess.)

Whether Amundi properly understood/evaluated/answered the question is not here or there: maybe they didn't, but if we are to second guess then there's no value in asking in the first place.  The point of asking Amundi IMO is to document/back our SA choices with HMRC.

But I have one more complication: while @aroominyork got direct a reply from Amundi the fund manager, I'm still awaiting one myself.  All I have in 2nd hand communication of what Amundi wrote.  And while I don't doubt @aroominyork I feel I need a direct reply I can confidently show HMRC if they ever come and ask about this.

Good news for me is that ERI will only affect my 2025/2026 Self Assessment.  So I have plenty of time until 31 January 2027 to pester Amundi for a reply or make my mind of what to do if I don't get one...

LateGenXer

I also received direct confirmation from Amundi that CSH2 is an equity fund and not a bond fund.  They added "This is due to the contents of the its substitute basket."

So that's how I plan to declare its ERI on my SA.

masonic

Interesting. I can see HMRC taking issue with Amundi over that. It feels like a game of whac-a-mole is in play.

aroominyork

masonic said:

Interesting. I can see HMRC taking issue with Amundi over that. It feels like a game of whac-a-mole is in play.

Possibly, but you previously thought they might be declaring ERI because HMRC nudged them to do so. It's possible/likely their discussion with HMRC also touched on whether income should be declared as dividend or interest.

masonic

aroominyork said:

masonic said:

Interesting. I can see HMRC taking issue with Amundi over that. It feels like a game of whac-a-mole is in play.

Possibly, but you previously thought they might be declaring ERI because HMRC nudged them to do so. It's possible/likely their discussion with HMRC also touched on whether income should be declared as dividend or interest.

Given HMRC's stance on fractional shares within ISAs (which IMHO was overly strict and gained them nothing), it's vanishingly unlikely they'd take the position that actual legislation directing them to consider the subject matter of the derivative should be ignored (which results in a significant loss of tax revenue in most cases).

slinger2

Has anyone had confirmation of when the CSH2 reporting date will be? 30 September?

LateGenXer

masonic said:

Interesting. I can see HMRC taking issue with Amundi over that. It feels like a game of whac-a-mole is in play.

It wouldn't surprise me if accounting/taxation of derivatives gets further tweaks, as it's all so complex.  And only recently did MMFs such such inflow of assets, so unlikely to caught HMRC attention before.

But I doubt Amundi is forcefully pushing the boundaries here with creative accounting.

If you look around are no replication based SONIA trackers https://www.justetf.com/uk/search.html?index=Solactive+SONIA+Daily&search=ETFS .  There are probably fundamental reasons.  It's not Amundi sticking its neck out.

Perhaps the swap contract on its own could be classed as "bond fund".  But perhaps the NAV of the substitute equity basket is more than 40% of the fund NAV.  I googled up "total return swap valuation/pricing" and come across pretty complicated things: https://quant.stackexchange.com/questions/47482/valuation-of-total-return-swaps-trs

The good thing about having Amundi confirmation is that I can avoid the headache of trying to make sense of this.  Though probably it's worth double checking every year there's no change to its non bond fund status.