GIA CGT calculation
Hi all,
I was looking to get some guidance on how to calculate CGT gains arising within a general investment account. We have a client that has held investments over a 6 or 7 year period who has made part disposals along the way. Is there a simple way of calculating the new acquisition cost once units are disposed of?
We have just moved the account to a new platform and unfortunately don't have the access to a CGT calculator.
Any information or advice would be brilliant.
Thank you in advance
Luis
Comments
If it's a single holding it's not too bad, but if multiple funds within a portfolio it can be a bit of a nightmare! It also depends on how complicated you want to make it. What I mean by that is if you follow the rules to the letter the calculations can get quite unwieldy, particularly with multiple funds in a portfolio. The key issues you need to take into account if you're calculating manually are:
- Notional Distributions on Acc units
- Treatment of reinvestment of income payments on Inc units
- Share class switches
- Equalisation on Inc units
Notional distributions have the greatest impact on the base cost, followed by equalisation on Inc units. Probably your biggest hurdle to doing accurate calculations will be getting a transaction history that provides details of all of the above.You also need to consider whether the extra time spent on doing the calculations 100% accurately is actually cost effective from the clients point of view. For example, if it costs the client an extra £500 for you/the accountant to do detailed calculations, but that only ends up saving them £200 in CGT, is that good value? From experience, I'd say that it's usually only the larger portfolios (£500k+) that tend to yield decent savings by doing a really accurate calculation i.e. taking into account everything.
Also, don't worry too much about getting the calculations 100% right for HMRC purposes as in my experience most accountants won't even do a CGT calculation that takes account of all of the above, either because they don't know how or the cost for them to do so would outweigh any savings to the client. This is probably why HMRC don't really worry too much about S104 CGT calculations as they get more tax if individuals don't do the caluclations 'correctly'. Cynical, but logical!
In terms of guidance, a good place to start is here: HMRC Helpsheet HS284 This is also useful to understand how notional distributions and equalisation can affect the base cost of holdings: Notional Distributions & Equalisation
I assume you've also seen the other post on CGT from the other day?: Other forum topic
Any other questions, please feel free to get back to me.
Jonny
Hi Jonny,
Really appreciate your detailed reply.
This is for a portfolio of funds unfortunately, so like you say, it starts getting tricky. I think it would be a nightmare sifting through all of the transactions that have taken place within the portfolio, let alone trying to obtain this information.
I think it will just be a case of using the base cost along with the unit price & seeing what sales have taken place during this time.
Thanks again.
Luis