Capital Gains Tax (CGT)

It would be useful for retail investors to be informed at the end of each Tax Year, assuming that profits are made on MF Portfolio Investments, the figure that is assessable for CGT. Also, in the same vein any capital losses that might occur, so that they can be considered for carrying over to the next Tax Year, or offsetting against other asset sales in a particular year.

Also, it would be useful if it is flagged up that an investor has reached the limit of the CGT allowance for a particular year. This is £12,000 for the 2019-2020 Tax Year.

2 Likes

I was assuming for the non-ISA products that the CGT you’re liable for would only relate to times when you chose to withdraw money from the product (a sell event), at which point you’d be liable for the gain realised (which is fairly straightforward). Since the portfolios do a lot of buying and selling behind the scenes every day, it could get very complex if you had to report the sales within the shared portfolio.

Would be good to get clarification from marketsflow on which events count for CGT and how to calculate it for a marketsflow managed portfolio.

1 Like

I don’t think shares being in a non-tax protected Portfolio will prevent HMRC from viewing each fast-trade sale as being the selling of the asset. They are very specific on this - CGT liability arises when the value of an asset is realised - and is counted towards the cumulative calculation of profit in excess of the CGT allowance for that year.

This does open up the possibility for MF of offering Portfolio products to joint applicants. This effectively gives the opportunity to use 2 x CGT allowances, in the event that one of the applicants (be it someone’s wife or partner) was not using, or fully utilising their CGT allowance in a given Tax Year.

1 Like

Thanks for asking, it would be good to know what the rules are on this.

If as you say MF are performing the trades on our behalf behind the scenes in a separate account per user it would seem we’d be liable for CGT and will need MF to work it out (MF needs to be really upfront about this and change their docs if so, and provide tools for calculating CGT as users won’t be able to, it’s potentially a huge headache involving itemising each trade made). Is there any mention of this on the MF site? I can’t find it.

But if you’re buying a packaged product/portfolio which pools your money with that of others, and don’t have a separate trading account which performs individual trades on your behalf, I would have thought for CGT purposes the important action for the individual concerned is buying or selling a part of this portfolio from MF. I’m hoping this is the case but totally see why it might not be. Obviously that’s true for ETFs, but of course the managed portfolio is not an ETF so maybe we will have to do CGT calculations.

It would be nice to have some clarity on this either way from @tom_mf

1 Like

Thank you @Curious1and @kenny for bringing this up, I will look into this and provide clarification.

1 Like

@tom_mf, can you look into how option income will be reported and whether it will be on a pooled or individual basis please? Although slightly different as the options are for under 1 year, this will count as income vs capital gains

1 Like

Any news on this? I would like to know where we stand on it, even if the reporting tools are not ready as yet.

If clients are exposed to capital gains for every trade performed by marketsflow, or just for the buy/sell of the portfolio itself. If the latter, it’s not really a problem, if the former, it’d be nice to see a plan/timeline for reporting tools to report CGT exposure for clients.

2 Likes

Thanks @kenny

Really busy here but I will try and get a response on this by tomorrow.

1 Like

Hi @tom_mf, any updates on this yet?

Hi @JamesWhitt sorry for the delay on this, I am currently away on business in Montreal and am waiting response from our compliance. I will come back to you on this.

1 Like

Hi all, I am waiting for a more concrete response, but the initial assumption with the Compliance is that the clients will not be subject to CGT or Options income tax, because it is not the client’s individual accounts subjected to trading. The clients would only be subjected to CGT/income tax per the sale of their portfolio.

I will be confirming the above.

1 Like

I am neither a compliance expert nor tax adviser, but that seems to make sense to me.

MF appears to fit the definition of a pooled fund and in that instance, gains are not subject to income tax, but any dividends generated within these investments, whether distributed as income or reinvested, are assessable to income tax.

When units are sold from these investments, CGT will be applied to any profit made over the annual CGT limit (currently £11,100 per individual I believe).

Given that MF acts more as an active manager that in some instances day trades, it may not have many dividend inflows - but it would be good to get confirmation on that.

Just a slight correction - CGT allowance is £12,000 per person for 2019/20

1 Like

I stand corrected and am £1k richer. :joy:

Well 10% or 20% (I assume the latter) on £900 richer :wink:

@tom_mf, can you confirm that we will receive an annual tax report highlighting the various income (dividends and option income) we will need to report on our annual tax returns please?

Oh bugger. Too late, I already spent the £1,000! :grimacing:

Presumably reinvesting back in Marketsflow? :joy:

No. Wife went shoe shopping. :rofl:

I don’t think you can write that off as a loss for CGT!

1 Like

Ok here is the response back from the compliance.

Yes CGT is only payable by the investor when investor cashes in the portfolio. So the investors are only liable for CGT when they sell their portfolio.

1 Like