CGT Incidental costs

Posted by Paul D Utherone PM | on Thu, 17/11/2011 - 18:36 625 2 comments | report

Possibly silly question, but here goes.

Client pays say £100k to an investment manager who deducts an initial charge of £2.5k and then purchases unit trusts/OEICs with the balance of £97.5k

I have calculated the CGT on subsequent disposals using the relevant costs of the units out of the £97.5k balance, but is a proportion of the initial charge allowable as an incidental cost under TCGA s38 or not.

Reading the section I think possibly not, but....?

Comments

Why not?

BKD | Fri, 18/11/2011 - 08:23 | Permalink

I would say those costs fall squarely within the definition of incidental costs of acquisition paid to an agent.

No different to you asking the agent to purchase £97.5k worth of investments and then him sending you an invoice for £2.5k.

I suppose that it may depend on exactly how the charge is described. If, for instance, it is described as an annual charge, payable in advance, then your analysis is probably correct.

It is called an Initial charge

Paul D Utherone | Fri, 18/11/2011 - 08:48 | Permalink

and is followed by very much smaller half yearly charges funded by selling a few units.

Looking at the legislation again perhaps you are right, it just feels that there is some disconnect between the money going in and that used to buy units. On the face of it, it is not shown like a broker charge as a deduction on a contract note, so is it W&E for acquisition of the units