CGT on switch from Accumulation to Income Units

Hi, I have a question about Capital Gains Tax and collective fund investments– more specifically, switching funds between Income and Accumulation Units within the same sub-fund / shareclass. I understand that when a fund manager merges funds or undertakes a 'shareclass conversion' to exchange one type of unit for another (e.g., Investment A Acc units to Investment A Inc units) then the base cost for CGT purposes carries over and it is not a 'CGT event'. However, it is unclear as to whether an investor personally switching 100% out of Investment A Acc units and into 100% Investment A Inc units would be liable for capital gains. TCGA 1992 Section 103F leans on the work 'exchanges' but it is unclear whether this is meant to be taken in the literal sense (i.e., the investment manager needs to organise a 'swap' from Acc to Inc) or if investor-triggered switches are also acceptable. HMRC Tax Bulletin 28 seems to specifically imply that investor-led switches are acceptable and would not crystallise a gain; similarly, CG57709 uses the word 'switch' when referring to moving between Accumulation and Income units. Could you please confirm either way. Thanks.

Hi Damian,

Switches between different share classes within the same fund are not treated as a disposal for capital gains purposes, so no Capital Gains Tax is due.

Thank you.

If an investor switches from Accumulation units into cash, and then immediately switches the cash into Income units of the same fund, would this also not be treated as a disposal for capital gains purposes?

Hi Sam,

In a straightforward switch, where no consideration is given or received apart from the old units and the new units, the switch would be treated as
not giving rise to any disposal for CGT purposes.
The new units will be treated as having the same date of acquisition, and the same capital gains cost, as the old units.

Thank you.

Hello, I have a question related to this subject but concerning a slightly different kind of fund (share class) switch. If an investor (client) switches to a share class denominated in a different currency, but of the same fund, does that count as a 'CGT event'? In this instance, the switch would be from 'I USD distribution' to 'I GBP Hedged distribution'. Thank you.

Hi Josh,
Please refer to:-  IFM16210 - Exchanges of units for units in the same collective investment scheme
Thank you.