a Sub-fund of LF Ruffer Investment Funds liquidating

The sub fund for Ruffer is liquidating and the options are to switch or redeem. If I redeem I will be subject to a large gain which is out of my control. If i can switch would I be able to switch into a fund priced the same and this wouldn't be subject to CGT. I don't think this is fair that I will be subject to CGT full stop as this is the funds issue. Any ideas?

To give you nore context, Due to the liquidity of some of the assets held by the Sub-fund, it is the opinion of the Investment Manager and the ACD, that it is in the best interests of the investors that the Investment Manager should commence the liquidation of these assets prior to FCA submission. Once these transactions have been effected, the Sub-fund will not be aligned to the minimum percentages set out in the investment policy. The ACD considered whether a scheme of arrangement is appropriate and concluded there were no suitable funds with compatible investment objectives either managed by the same investment manager, or another investment manager to facilitate a merger. In light of the above, the ACD considers that the Sub-fund would no longer be commercially viable. The final valuation point of the Sub-fund will be 5 July 2023 (the “Effective Date”) with an initial distribution expected to be paid on or around 19 July 2023. A subsequent distribution is expected to be made. We aim to complete the termination of the Sub-fund and the Sub-fund’s accounts as soon as practical, acting in the best interest of investors. Should you wish to do so, you may instruct the Transfer Agent to redeem your holding at any time prior to the commencement of the termination which is intended to take effect on 9 July 2023, or alternatively you can switch your holding to another Link Fund Solutions Limited (“LFSL”) fund at no extra cost to you. How can this be in my best interest if i'm realising a gain of £300,000.00. I'm i eligible to switch this to another fund due to termination of the sub fund and not be charged CGT?

Hi Cram C,

We are unable to give financial planning advise, you may wish to seek independent financial advice.

Thank you.

I'm not wanting financial planning advise, i want to know the below would be possible Umbrella schemes A unit trust may take the form of an ‘umbrella scheme’ authorised by the Financial Services Authority. These schemes have separate sub-funds which are treated as separate authorised unit trusts for Capital Gains Tax (CGT) purposes. A switch from units in one sub-fund to units in another will normally be a disposal of the old units, on which capital gain or loss will arise. But if the switch occurs as part of a merger of sub-funds, the rules described in Helpsheet 285 Capital Gains Tax, share reorganisations and company takeovers may apply. If so, you are not treated as disposing of your old units at the time of the merger. Could i switch from one Sub fund to a completely different Sub fund as part of a share reorganisation as my current sub fund is being terminated?

Hi
This is relating to financial advice which HMRC are not authorised to give.
You may want to discuss with a financial adviser.
Thankyou.

Hi Cram C,

The guidance at  CG57701 states “If a unit holder switches out of one continuing sub-fund into another, there is a disposal for CGT purposes. This is on the basis that the unit holder disposes of an interest in one company and replaces it with an interest in another. But if one sub-fund disappears on being merged with another, rollover treatment under TCGA92/S136 (company reconstruction or amalgamation involving the issue of securities) may be available

Guidance on company reconstructions and amalgamations can be found at CG52700 - Company reconstructions: shareholder: introduction. The basic idea behind schemes of reconstruction is that where the original shareholders keep an interest in the original business then, subject to conditions, they will not be treated as having disposed of their original shares.

The qualifying conditions for S136 TCGA 1992 to apply are covered at CG52701 and there is a relevant example at CG52726 (Investment trust & unit trust reconstructions). 

Thank you,