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Posted Sat, 11 Sep 2021 09:08:52 GMT by Tony Heath
I've been retired for a couple of years now, and some of my income is from unit trusts (outside ISA/SIPP wrappers). With some unit trusts I originally bought INC units but in others I bought ACC. Now that I'm income dependent, when the markets are high I sometimes take profits by selling some units and use up some of my annual Capital Gains Allowance. If the markets take a big dive, I sometimes buy more units to take advantage of the next rise. Naturally I'm aware of the share-matching rule if I were to buy more of the same units within 30 days after the sale. What is NOT clear from the HMRC Capital Gains Manual though, is what happens if I sell some of my ACC units and then later decide to buy some INC units instead of ACC units in the SAME unit trust. CG57709 states: "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, see CG51700+." Confusingly, the ACC and INC units seem to be given the same class letter e.g. L&G UK100 Index Trust has "ClassC INC" and ClassC ACC" units. However the above quote says they should be treated as different classes. OK, in that case they should each have their own completely separate Capital Gain calculation sheet, yes? But, if they each have their own calculation sheet, then there's a conflict with the last sentence in the above quote. If the ACC sale and the INC purchase are sufficiently close together and of sufficiently similar transaction values to constitute a "switch from one class to another within the same unit trust" then they have to be treated as a "share reorganisation" which of course is an event that doesn't constitute a chargeable disposal on the sale transaction. If that happens, then somehow the two separate CG calculation sheets are going to have to reconcile that non-chargeable disposal! So the question is, if we can keep separate CG record sheets for ACC and INC units in the same unit trust, how close together would the sale of some ACC units and the purchase of some INC units have to be, before you would consider them to be a "switch" and therefore a "share reorganisation"? Is it 30 days? Or is it not really a "switch" in this situation unless they happen on the same day? Thanks. Tony Heath
Posted Tue, 14 Sep 2021 12:47:20 GMT by HMRC Admin 17

A share reorganisation is a general term used to describe certain transactions in which: new shares are issued to the shareholders in a company, or,
the rights attaching to shares are altered, or, a company’s share capital is reduced.

These are company led transactions.

So a switch in the guidance refers to a company offer to swap inc for acc units etc.

The  30 day rule will not apply as the units are regarded as separate classes.

Normal  CG rules will apply. The sale of acc units followed by the purchase of inc units at any point will not be linked transactions.

Thank you.
Posted Tue, 14 Sep 2021 13:39:24 GMT by Tony Heath
Thank you, that's a really clear answer. Much appreciated! I waited 5 months after writing by snailmail to the CG unit to get a reply that was nothing more than a list of entries in the CG Manual, and I didn't understand that in the first place which is why I wrote to them, and you've answered it clearly in just a few days :o) Kind regards, Tony.

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