Acc vs Inc and Bed & Breakfast and Capital Gains

[Rajput1962]

I have a holding in Vanguard LS 80 acc, and it's currently showing a modest gain. I am thinking that i should crystallise this amount as part of this year's capital gains tax allowance. If i was to sell LS 80 acc units and instead buy LS 80 inc units, is that 'allowable' under the 30 day bed and breakfast rules? i.e. is LS 80 acc considered to be the same fund and class as LS 80 inc, or not? Or would making the sale and buy within 30 days still mean that the original LS 80 acc price would somehow be used to calculate gains in future years despite then holding LS 80 inc? [How so?!] If so, presumably it would mean that i wouldn't therefore benefit from making the sale and purchase as described above, and the capital gains for this tax year would be 'lost'?

[If the above isn't allowable, then i will probably sell LS 80 inc and buy VWRL in its place, and then vice versa at some point next year, to take advantage of any capital gains].

[Alaric]

Or would making the sale and buy within 30 days still mean that the original LS 80 acc price would somehow be used to calculate gains in future years despite then holding LS 80 inc? [How so?!]

Prices are not directly relevant to the calculation of gains.

Gain is what you get back (after sales commission) versus what you paid including commission and stamp duty (base cost). If you hold accumulation units, you are allowed to add back the implicit dividend distributions to your base cost.

I would expect that different classes of units in the same fund would be considered the same asset under the 30 day rule. I'm not sure where there would be a definitive statement though. You are quite safe under current rules to buy another fund even if its investment mandate in terms of the market it follows is the same as the fund you sell.

[TedSwippet]

If the above isn't allowable, then i will probably sell LS 80 inc and buy VWRL in its place, and then vice versa at some point next year, to take advantage of any capital gains.

VWRL and LS 80 are not really equivalent (specifically, LS 80 has both a bond component and a UK bias, neither of which exist in VWRL). A completely equivalent switch would be from LS 80 to a 50:50 mix of LS 100 and LS 60.

I've seen arguments both for and against an acc/inc switch being allowable under the silly bed and breakfast rules, but don't recall ever seeing anything completely definitive. As a general rule though, I find it's usually best to keep acc units out of taxable accounts and reserved for ISAs and SIPPs only, because of the trickiness of nailing down capital gains with them. For my money then, switching (temporarily or otherwise) to a mix of LS 100 and LS60 seems the most attractive option. Acc if you like, but inc may be simpler in the long term.

[PinkDalek]

... If i was to sell LS 80 acc units and instead buy LS 80 inc units, is that 'allowable' under the 30 day bed and breakfast rules? i.e. is LS 80 acc considered to be the same fund and class as LS 80 inc, or not? ...

LS 80 acc = Vanguard LifeStrategy 80% Equity Accumulation https://www.hl.co.uk/funds/fund-discoun ... cumulation ?

LS 80 inc = Vanguard LifeStrategy 80% Equity Income https://www.hl.co.uk/funds/fund-discoun ... ity-income ?

TCGA92/S104(3) provides `shares or securities of a company shall not be treated as being of the same class unless they are so treated by the practice of a recognised stock exchange or would be so treated if dealt with on a recognised stock exchange ...’. from https://www.gov.uk/hmrc-internal-manual ... al/cg50203

From the Key Features pages:

The Equity Accumulation has an ISIN code: GB00B4PQW151
The Equity Income has an ISIN code: GB00B4KWNF91

That suggests to me they are unique securities.

I'd ask Vanguard, as it can't be the first time such a question has arisen.

[Hariseldon58]

My understanding( please do not take this as gospel..) is that going from accumulation to income or vice versa is not treated as a disposal, simply a reorganisation of a share/fund holding.


https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg57709

[PinkDalek]

My understanding( please do not take this as gospel..) is that going from accumulation to income or vice versa is not treated as a disposal, simply a reorganisation of a share/fund holding.


https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg57709

That looks like something I’d hoped to have found!

Many unit trusts offer accumulation units and income units. These should be treated as different classes of unit. Any switch from one class to another within the same unit trust should be treated as a share reorganisation.

I can’t say I follow what is says there though. Is a switch the same as a sale of an acc and a repurchase of an inc?

If it is then they direct (well they don’t but here it is) to here:

https://www.gov.uk/hmrc-internal-manual ... al/cg51700

[carboot]

If inc/acc is a reorganisation, then looking at your second hmrc link above, I think it is pretty clear?

Para 3:
"For capital gains purposes a share reorganisation is not treated as a disposal of the taxpayer’s existing shares or an acquisition of any new shares and new shares issued are treated as though they were acquired at the same time as the existing shares"

Therefore it looks that swooping acc/Inc will not be a disposal