CGT matching rules for OEIC ( different classes, same fund)

[DeepSporran]

With an eye on making use of the annual CGT exemption, I am trying to decide what to sell by April 5th. I could sell off some units in an OEIC, but I am quite happy with that investment and would like to sell it and buy back, setting a new base price.

I know that if I sold and bought back the identical class of units in the same fund, then I would caught by the matching rules which would match any same day purchase, or purchase within next 30 days, with the sale.

I believe that if I repurchase units in the same fund which are a different class, then they will not get matched in this way.

So does this mean that if I sell Income units, but repurchase accumulation units, I can get round the matching rules and effectively stay invested in the same asset (albeit Accumulation vs. Income ?)

I appreciate that Accumulation units will make future calculation for CGT a pain, so I might even (after 30 days) sell the accumulation units and buy back the Income units. The broker fees would be minimal compared to the CGT saved.

I would welcome confirmation that my understanding is correct.

Thanks,
DS

[SebsCat]

This article https://techzone.abrdn.com/public/inves ... ollectives says that you can't get around the matching rules by switching classes.

Any capital growth when an investor sells or disposes of units/shares may be subject to Capital Gains Tax (CGT). This also includes fund switches. However, switches between different share classes within the same fund, for example switching between income and accumulation shares, are not treated as a disposal for CGT.

The HMRC manual doesn't directly state this and merely says that it "can apply". From https://www.gov.uk/hmrc-internal-manual ... 7755[quote]
OEICs can issue shares of a number of different classes. These include income shares, net or gross accumulation shares and currency shares, see CTM48325. Where an investor switches between classes of share in the same OEIC, TCGA92/S127 can apply. See CG51700+ for further details.

(Authorised unit trusts may issue units of different classes, analogous to an OEIC’s classes of share. Where this is the case, TCGA92/S127 can likewise apply where an investor switches between classes of unit in the same authorised unit trust.)
[/quote]

CG51700 doesn't seem very helpful, being about share reorganisations, https://www.gov.uk/hmrc-internal-manual ... al/cg51700

nb: TCGA92/S127 is section 27 of the Taxation of Chargeable Gains Act 1992, https://www.legislation.gov.uk/ukpga/19 ... ection/127

127 Equation of original shares and new holding.

Subject to sections 128 to 130, a reorganisation shall not be treated as involving any disposal of the original shares or any acquisition of the new holding or any part of it, but the original shares (taken as a single asset) and the new holding (taken as a single asset) shall be treated as the same asset acquired as the original shares were acquired.

[Lootman]

I cannot cite a definitive answer but I suspect that this would not hold up, if challenged. it is essentially the same security, and you are engaging in this swap for no reason other than to gain a tax benefit.

However what I believe would work is selling out of this fund and buying a very similar fund from a different fund manager. So for example you sell an iShares UK tracker and buy a Vanguard UK tracker. Although even there I suspect that if too many investors do that, the taxman would change the rule to something more like the US wash sale rule that disallows a tax loss if you purchase of a "substantially similar" security within 30 days of the sale.

[Gersemi]

Yeah, the trouble is that if switching between different classes of the same OEIC were treated as a disposal and purchase for CGT then it could be unwelcome such as when the manager switches them to make them 'clean' ie to reduce the manager charges. I would have been most upset if this had triggered a CGT charge when this happened to me.

[Alaric]

Yeah, the trouble is that if switching between different classes of the same OEIC were treated as a disposal and purchase for CGT then it could be unwelcome such as when the manager switches them to make them 'clean' ie to reduce the manager charges. I would have been most upset if this had triggered a CGT charge when this happened to me.

I think the change to unit classes without trial commission is the worked example. That went ahead without causing CGT issues. For that matter, it should be possible to durectly convert from income to accumulation or vice versa. When I did this, it was on holdings directly with the fund manager, so it may be different for holdings on a platform.

[DeepSporran]

Thanks all for your input. I guess I was being a bit optimistic.

I remember when I switched to “clean” classes a few years back that I was explicitly advised that it would not count as a disposal and generate possible CGT. I think I interpreted this as being the exception: i.e. a switch between different units would be a disposal under other circumstances.

It’s unfortunate (maybe deliberate?) that the HMRC manual is a bit coy in spelling out in detail what is allowed and what is not.

Never mind, I can live with swapping to a similar OEIC or IT which was going to be Plan B anyway.

EDITED: clarifying some text