Record accumulation fund distribution/equalisation

English
1

I hold an open-ended accumulation fund that recently ‘paid out’ a distribution. At the same time, I also had an equalisation applied to the same holding. The consequence of the distribution/accumulation is that the book cost shown on my brokers platform is now greater than the book cost shown in Portfolio Performance by exactly the difference between the distribution (the larger) and the equalisation (the smaller) ‘payment’. Consequently, the profit/loss calculation and performance differs between the broker and Portfolio Performance.

How do I book a distribution and equalisation in Portfolio Performance when no income is paid out and the change is reflected in the underlying cost of each unit?

2

If the number of shares hasn’t changed, it’s simple: You don’t.

3

Ok, then I’m not sure I fully understand what my broker platform is trying to tell me compared to PP. Both show the same number of units, but the overall performance is higher on PP than on the broker platform because the cost of the units on PP is lower. Is the performance figure given by the broker platform wrong?

4

Probably a tax thing. I assume the virtual distribution got taxed. In that case, what the broker tells you is the profit that has not yet been taxed.

6

Hi @Rich28, you’re right, the fund in question is held with a UK broker outside of a tax-free wrapper.

I spoke to my broker and they confirmed that the nominal distribution was added to the book cost, while the equalisation payment (i.e. the return of capital) was subtracted. They do this to ensure that the nominal distribution is not taxed twice. In the UK the nominal distribution is liable for dividend tax, but if you don’t add the value of the distribution to the book cost (minus the equalisation), then you can end up paying capital gains tax on the distribution as well.

I’ve been thinking about how to deal with this on PP and as @chirlu said, I don’t think you should do anything. Although the nominal distribution is liable to dividend tax, it hasn’t yet been paid, and might not be taxed at all if you don’t exceed your personal allowance. So I’ve concluded that it should only be the eventual tax charge (if any) that should be added to PP. I’ve just added a note recording the nominal distribution so that I have these figures to hand when I come to calculating the capital gains

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