General Investment Account record keeping

dllive

Hi

Each year I always max-out my ISAs, SIPP etc...

A couple of years ago I started investing in passive index trackers funds in my General Investment Account (T212 and Vanguard platforms).

I dont plan on selling anytime soon. I view these investments as long term holdings.

I read that - for reporting tax etc - its far easier to invest in income classes of funds. Which is what Ive done. However, recently I invested in their accumulation versions by mistake.

As a matter of course, everytime I make an investment in my GIA, I keep a log of:

Order No., Fund name, Order date, Unit price, Units purchases and the Amount.

So my question is, from a tax reporting perspective, does it make much difference investing in accumulation or income classes? Should I favour one over the other? Should I sell my accumulation classes and buy into their income equivalents?

Thanks

eskbanker

dllive said:

As a matter of course, everytime I make an investment in my GIA, I keep a log of:

Order No., Fund name, Order date, Unit price, Units purchases and the Amount.

You don't just need to keep records relating to purchases, which is the easy bit, but also dividends, which then bring the concept of equalisation into the equation.

dllive

OK, that sounds complicated... and a faff.
Perhaps Im better off just selling the couple of investments I made into accumulation classes, and buy income classes instead.
The two fund I made an investment with are: Invesco FTSE All-World and SPDR S&P 500 UCITS ETF

eskbanker

dllive said:

OK, that sounds complicated... and a faff.
Perhaps Im better off just selling the couple of investments I made into accumulation classes, and buy income classes instead.
The two fund I made an investment with are: Invesco FTSE All-World and SPDR S&P 500 UCITS ETF

The point I was making is that you need to keep records of dividends when investing anywhere outside the tax shelters, so you need to do this regardless of whether you're using acc or inc units.

kempiejon

If you never sell you are potentially accumulating a tax event in the future. In my GIA I switch between funds every few years to reset capital gains. The capital gains allowance should be used, £3k per year profit compared to dividend income tax allowance of just £500. I heard about buying the income fund to make record keeping easier but subsequently learnt that some income versions have excess reportable income too.

dllive

Ah ok. I dont suppose thats a simple case of  - at the end of each tax year - exporting all transactions from T212 and Vanguard?

Apologies for my ignorance. What would the work-flow be for keeping logs of investments and dividends?

dllive

kempiejon said:

If you never sell you are potentially accumulating a tax event in the future. In my GIA I switch between funds every few years to reset capital gains. The capital gains allowance should be used, £3k per year profit compared to dividend income tax allowance of just £500. I heard about buying the income fund to make record keeping easier but subsequently learnt that some income versions have excess reportable income too.

Thats a good idea about resetting CGT!

Yes, Ive read about excess reportable income, although I believe thats not the case with funds traded in sterling. (again, I may be completely wrong!)

dllive

Actually, its UK domiciled funds where you dont have to worry about excess reportable income. 

ColdIron

dllive said:

I read that - for reporting tax etc - its far easier to invest in income classes of funds. Which is what Ive done. However, recently I invested in their accumulation versions by mistake.

It's a little easier with Inc units but either way you're going to have to do a calculation for CGT purposes

With Inc units you can ignore dividends for CGT (as it's paid out) but you must account for equalisations for each purchase. They will usually increase the simple/apparent capital gain but this should only need to be done once (per purchase)

With Acc units you can ignore equalisation (there are none as there is no return of capital) but need to deduct any retained dividends for each sale. This does make it more fiddly as you could get 1, 2, 4 or even 12 payments per year

For dividend tax itself your annual Consolidated Tax Certificate will detail the dividends so that's easy enough

As a matter of course, everytime I make an investment in my GIA, I keep a log of:
Order No., Fund name, Order date, Unit price, Units purchases and the Amount.

You should also record your transaction charges and stamp duty (if any) as they can be deducted from the simple gain

Should I sell my accumulation classes and buy into their income equivalents?

I would. It's the same fund so should make little difference to your cost if you get onto it quickly

One position I wouldn't like to be in is having to deal with both equalisation and retained dividends

dllive

Thank so much @ColdIron

For all these years Ive only ever invested in my ISA/SIPP, so have never had to give this any thought. I wonder how many people get caught out on this stuff!

Im going to have to find an article about this to understand it better (although you have given a very decent explanation thankyou)

dllive

Can I ask - what would the Income equivalents of Invesco FTSE All-World (Acc)  and SPDR S&P 500 UCITS ETF (Acc) be?

For example, Ive searched on T212 for "Invesco FTSE All-World" and theres quite a few! Presumably I should get FTWG because its on the London Stock Exchange? What about SPDR S&P 500 UCITS ETF?