Funds Insider - Opening the door to funds

Welcome to the Citywire Funds Insider Forums, where members share investment ideas and discuss everything to do with their money.

You'll need to log in or set up an account to start new discussions or reply to existing ones. See you inside!

Notification

Icon
Error
Liquidty+ or CSH2 and PersonalAllowance Planning
+ Reply to discussion
Options
NigelV
Posted: 15 September 2023 13:50:37(UTC)
#1

Joined: 24/11/2017(UTC)
Posts: 123
With the current cash saving rates meaning more higher rate tax payers will hit the saving allowance limits, for when they start to pay tax on interest. Does it make more sense (other than using PBs) to use one of these vechiles to keep cash savings in, as I guess you only pay CGT on the gains made when you sell out.

Liquidty+ highlighted by David Stevenson this week, run by Moneyfarm, https://davidstevenson.substack.com/i/136928860/money-market-plus



Of course you have more risk, I know but hopefully some of that is managed away, or of course you can use a Cash ISA whihc has rates that are normally much poorer than the open market.
Back to top Quote
Tim D
Posted: 15 September 2023 14:50:36(UTC)
#2

Joined: 07/06/2017(UTC)
Posts: 8,883

Thanks: 33209 times
Was thanked: 24362 time(s) in 7229 post(s)
NigelV;279274 wrote:
With the current cash saving rates meaning more higher rate tax payers will hit the saving allowance limits, for when they start to pay tax on interest. Does it make more sense (other than using PBs) to use one of these vechiles to keep cash savings in, as I guess you only pay CGT on the gains made when you sell out.

Liquidty+ highlighted by David Stevenson this week, run by Moneyfarm, https://davidstevenson.substack.com/i/136928860/money-market-plus


Uh, not too clear to me how you think these things work. But so far as HMRC is concerned interest is interest (and taxed as such) whether you receive it directly or have it rolled up in an accumulating fund. https://monevator.com/in...x-on-accumulation-unit/ might be helpful (it's written with stock funds and dividends in mind, but it applies as much to funds of interest yielding investments too).
Back to top Quote
7 users thanked Tim D for this post.
Newbie on 15/09/2023(UTC), Guest on 15/09/2023(UTC), Thrugelmir on 15/09/2023(UTC), NigelV on 16/09/2023(UTC), Kenpen2 on 18/09/2023(UTC), COYS54 on 18/09/2023(UTC), LongJohn on 19/09/2023(UTC)
mgk
Posted: 15 September 2023 15:55:55(UTC)
#3

Joined: 04/11/2019(UTC)
Posts: 90

Thanks: 40 times
Was thanked: 119 time(s) in 54 post(s)
Liquidity+, assuming it is not an actual fund, could be a tax nightmare outside ISA/SIPP.

And they take 0.30% on top of the underlying fund charges.

You could end up with hundreds of transactions in the individual funds, and have to track dividends and/or excess reportable income amounts.
Back to top Quote
4 users thanked mgk for this post.
Tim D on 15/09/2023(UTC), Newbie on 15/09/2023(UTC), NigelV on 16/09/2023(UTC), LongJohn on 19/09/2023(UTC)
Newbie
Posted: 15 September 2023 16:56:44(UTC)
#4

Joined: 31/01/2012(UTC)
Posts: 3,819

Thanks: 6014 times
Was thanked: 7032 time(s) in 2604 post(s)
- Within wrappers have RL STMMF (subject to income tax)

- Outside wrappers have CSH2 (not subject to IT, I believe, happy to be corrected) - This parked money to trade or put aside for the beast that is HMRC.
Back to top Quote
2 users thanked Newbie for this post.
NigelV on 16/09/2023(UTC), AndyJ on 18/09/2023(UTC)
mgk
Posted: 15 September 2023 17:52:26(UTC)
#6

Joined: 04/11/2019(UTC)
Posts: 90

Thanks: 40 times
Was thanked: 119 time(s) in 54 post(s)
Newbie;279299 wrote:
- Outside wrappers have CSH2 (not subject to IT, I believe, happy to be corrected) - This parked money to trade or put aside for the beast that is HMRC.
CSH2 is, like all ETFs, not UK domiciled. It declares an "excess reportable income" amount each year. That would correspond to a year's worth of interest. For CSH2 specifically, if you hold shares at the end of its reporting year (31 October), you are deemed to receive the ERI amount on 30 April the next year.

Two main points to that:

- You can easily "convert" income tax (interest) liability to, effectively, deferred CGT by making sure you don't hold the fund on 31 October. Sell the day before, buy back the day after.

- If you're not aware of the specifics, you could accidentally create a tax liability. For example, suppose you buy shortly before 31 October and sell shortly afterwards. Your sale price would be slightly higher than purchase price. However, you actually incur tax liability on a year's worth of interest. But you can bump up your cost basis for CGT purposes by that amount, so you would book a corresponding CGT loss.
Back to top Quote
 |  Edit by user
6 users thanked mgk for this post.
Tim D on 15/09/2023(UTC), Newbie on 15/09/2023(UTC), NigelV on 16/09/2023(UTC), LongJohn on 19/09/2023(UTC), Spark on 19/01/2024(UTC), Keith Clunk on 23/01/2024(UTC)
Tim D
Posted: 15 September 2023 22:29:54(UTC)
#5

Joined: 07/06/2017(UTC)
Posts: 8,883

Thanks: 33209 times
Was thanked: 24362 time(s) in 7229 post(s)
Newbie;279299 wrote:
Outside wrappers have CSH2 (not subject to IT, I believe, happy to be corrected) - This parked money to trade or put aside for the beast that is HMRC.


(Doh... somehow missed mgk's answer above. But anyway...)

Have seen some comments elsewhere along the lines that while while the "synthetic" CSH2 might initially appear to have no distributions and so be all capital gain, effectively all those gains are actually reported as ERI and so liable to be taxed as income anyway. (Not gone looking for any ERI numbers for it myself to confirm this though.)
Back to top Quote
 |  Edit by user
3 users thanked Tim D for this post.
Newbie on 15/09/2023(UTC), NigelV on 16/09/2023(UTC), LongJohn on 19/09/2023(UTC)
Richard Weber
Posted: 22 December 2023 10:48:49(UTC)
#7

Joined: 20/03/2019(UTC)
Posts: 1
However, CSH2 has declared no ERI in recent years. See

https://www.kpmgreportin....uk/Home/PublicInvestor

This is surprising to me. If there is no ERI then there is no need to avoid holdinh on 31 October.
Back to top Quote
mgk
Posted: 19 January 2024 14:00:24(UTC)
#8

Joined: 04/11/2019(UTC)
Posts: 90

Thanks: 40 times
Was thanked: 119 time(s) in 54 post(s)
Richard Weber;290535 wrote:
However, CSH2 has declared no ERI in recent years. See

https://www.kpmgreportin....uk/Home/PublicInvestor

This is surprising to me. If there is no ERI then there is no need to avoid holdinh on 31 October.
Can you paste the text you're referring to here? It seems your link requires an account/login to view.

A while ago I emailed Amundi to ask for the Lyxor UK reporting documents. They didn't seem to be on their web site.

Here are ERI figures for CSH2 (ISIN LU1230136894). The fund's reporting year is 1 November to 31 October. Which incidentally means tax on the ERI is due for the following UK tax year (deemed distributed on 30 April).

2018: GBP 4.3959
2019: GBP 6.582
2020: GBP 2.3578
2021: GBP 0.00 (note: this was for a period when interest rates were extremely low, presumably any income was eaten up by the fund charges).

I don't have 2022 or 2023 figures but wouldn't be surprised if 2022 is also zero, with 2023 non-zero after interest rates started rising.
Back to top Quote
1 user thanked mgk for this post.
Tim D on 19/01/2024(UTC)
Dexi
Posted: 19 January 2024 14:41:47(UTC)
#10

Joined: 03/04/2018(UTC)
Posts: 1,752
Am I right in thinking that CSH2 rolls up the income into the fund so does not it pay out ? The performance is identical to ERNS , but the chart is a smooth upward curve , not like ERNS , which is stepped , as the income is payed out .
So if I bought CSH2 for 100 and sold for 105 , I would declare that ( 5 ) as income , not a capital gain ?
Back to top Quote
mgk
Posted: 19 January 2024 15:19:00(UTC)
#11

Joined: 04/11/2019(UTC)
Posts: 90

Thanks: 40 times
Was thanked: 119 time(s) in 54 post(s)
If you don't hold the fund on its reporting date which is 31 October, you would report a capital gain.

If you do hold the fund on that date, you are taxed on the ERI amount (whatever that turns out to be) as income, but you increase your CGT cost basis by the ERI amount.
Back to top Quote
 |  Edit by user
4 users thanked mgk for this post.
Dexi on 19/01/2024(UTC), Tim D on 19/01/2024(UTC), Fife Clive on 19/01/2024(UTC), Newbie on 18/04/2024(UTC)
+ Reply to discussion

Markets

Other markets