CSH2

slinger2

Interesting recent thread at https://www.reddit.com/r/UKPersonalFinance/comments/1weug57/bad_news_for_csh2_in_a_gia_for_20252026_tax_year/

Claim there that the ERI is treated as a dividend, while I thought it was concluded in a thread here that it was income.

Luckily for me, I didn't own any CSH2 on any of the reporting dates mentioned.

aroominyork

Head back to this thread:

https://forums.moneysavingexpert.com/discussion/6532073/csh2-taxation-and-performance

Amundi told me that because CSH2 holds equities as security for the swap, its ERI is taxed as dividend income. (Unfortunately my opening question (interest or capital gains) revealed a basic misunderstanding, but I got there eventually...)

slinger2

https://forums.moneysavingexpert.com/discussion/comment/82165874#Comment_82165874

However the issue is not what Amundi say, it's what HMRC say.

aroominyork

I asked HMRC. They said "ask Amundi". The blow by blow is in that long thread.

masonic

https://forums.moneysavingexpert.com/discussion/comment/82165887#Comment_82165887

There is certainly scope for HMRC to reach a different conclusion, but so far they have not opined.

aroominyork

https://forums.moneysavingexpert.com/discussion/comment/82166110#Comment_82166110

How might we know if they do - aside from waiting for a knock on the door?

vacheron

Glad they finally got round to doing this. It can be a pain when you are trying to rebalance on a platform that doensn't do fractional shares.

All my CSH2 is held with Freetrade who don't do fractional shares. But they are also in my SIPP, so have paid little attention to how the ERI payments would be taxed.

I can also see it increasing the demand from smaller investors, especially as CSH2 makes frequent appearences on a number of finfluencer channels, and currently the £1,255 barrier to entry may be a bit high for many.

masonic

https://forums.moneysavingexpert.com/discussion/comment/82166136#Comment_82166136

They might turn their attention to Amundi, or make a general announcement like they did about fractional shares in ISAs.

phlebas192

https://forums.moneysavingexpert.com/discussion/comment/82166136#Comment_82166136

As a UK taxpayer it is your responsibility to keep abreast of the relevant tax legislation and case law and apply it correctly.

A somewhat tangential comparison would be with Glencore's 'dividends' which, as far as Glencore are concerned, are capital distributions. If that's what they are then they impact on capital gains rather than income tax for UK taxpayers. A couple of years ago, the Upper Tax Tribunal ruled that they are actually dividends for income tax purposes (putting it crudely, the reasoning was "if it looks like a duck, swims like a duck and quacks like a duck, then it is a duck")

Glencore's website just says "Shareholders should contact their tax advisor for advice on the tax treatment for any distributions". Really helpful, not!

About the only practical advice is to google the situation each year before filing your tax return or following a sufficiently large disposal that CGT might be an issue. Better still, only hold potentially contentious holdings within a tax shelter.

slinger2

Are there any other similar funds which regard their distributions/ERI as dividends? Seems that ERNS and XSTR are treated as income.