Aegon has told platform customers who invested in the Woodford Equity Income fund to seek advice about capital gains tax (CGT) liabilities, because its online calculator will not be able to factor in distributions from the fund’s wind-up.
The distribution represented 74% of the published price on 27 January and amounted to a payment of £2.1bn from the £2.9bn fund to investors.
However the payments could affect investors’ CGT bills depending on which wrapper they invested through.
New Model Adviser® has learned that while some platforms will be able to factor in distributions from the collapsed fund into their CGT tools, others will not.
Aegon, which has around £140bn invested on its platforms, offers a tool that clients can use to calculate their CGT liabilities. But due to the complicated nature of the distribution, the tool will not be able to help investors.
‘Our CGT tool is designed to cover a core range of scenarios, but the exceptional nature of the fund’s wind-up is not one of them. Users should contact their tax specialist if in doubt about the implications of the fund closure,’ a spokesperson said.
Other platforms said their CGT tools would adapt to include the possible liability.
‘We will be reflecting the loss from Woodford Equity Income on client accounts and via our CGT tool as normal,’ a spokesperson for AJ Bell said.
‘The slight difference in this instance is that the number of units does not decrease as you’d normally see for disposal. Link is reducing the value of each unit to reflect the distribution and the value remaining for each unit. Therefore we have kept the units the same on client records and manually reduced the book cost to reflect the distribution and the loss incurred.’
Advisers who use Quilter’s Old Mutual Wealth (OMW) platform were sent a letter stating that ‘although units are not being disposed of as part of this transaction, the capital payment will be considered partial disposal for CGT purposes’.
The OMW platform CGT tool will pick up on the 74% distribution, and adjust accordingly, according to a Quilter spokesperson.
‘The Woodford capital distribution will be treated as a capital distribution (partial disposal) within the tool. The tool will show the appropriate gain or loss for the disposal and adjust the cost of the remaining holdings to reflect the distribution.’
James Hay’s Head of Technical Support, Neil MacGillivray (pictured above), told New Model Adviser® the Woodford fund disposal could mean investors, whose platform providers don’t offer a CGT tool, could face unexpected and unwelcome issues – so they needed to seek out advice.
‘A forced capital payment could mean that investors face an unplanned capital gain or loss, so they should speak to an adviser to address this,’ he said.
‘This could be a great opportunity for advisers to think about different tax planning opportunities for their clients, such as considering crystallising any losses to offset the gains and ensure that they maximize their CGT exemption.’