Handling equalisation and accumulation units from UK/IE funds

Managing trading & investments
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Most of my fund holdings are accumulation units, which have notional distributions (taxed as dividends) which is typically recorded as increasing the cost base (so that you’re not taxed a second time as capital gains). These distributions often also include an equalisation payment (a return of capital), which would correspondingly reduce the cost base.

How does anyone handle these in Sharesight? It seems to pull in the dividends but doesn’t have any awareness of the fact it’s an accumulation-based share class.

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For reference, as I figured this out with the assistance of Sharesight support.

Say you have a notional distribution of £100, of which £30 is an equalisation and £70 is an accumulation distribution, you will need the following:

  1. Entry in the ‘All distributions’ section, of £70.
  2. Entry in the ‘Trades & adjustments’ section of a ‘Capital call’ of £100
  3. Entry in the ‘Trades & adjustments’ section of a ‘Return of capital’ of £30

In this way your cost base, dividends and total return figures will be correct.

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Hi. How do you figure out the breakdown of the dividend? I’ve had a look and can’t see these figures for the funds I hold. Any insight gratefully received!

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Which platform are you on? At least on the ones I use, they give you the notional equalisation numbers alongside any notional dividend - because it has to go on the UK CGT report that most platforms provide.

On AJBEll this looks like:

Equalisation Acc Units - HSBC Global Strategy Dynamic C Acc - 30
Accumulation Distribution - HSBC Global Strategy Dynamic C Acc - 100

(so those go in as a capital return and capital call, and you then have a notional dividend of 100-30 ie 70)

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Hi @Shelving7129 , I know this is an old thread but I wanted to check the logic of this. I understand how this will approach will make dividend and total return figures correct, but are you sure that the cost base will be correct? I understand the logic of reducing the cost base for the equalisation portion of the distribution, but I don’t think that entering a capital call for the total distribution is correct - by doing so you are increasing the cost base for the accumulation distribution, which I think will mess up your CGT calculations - you will be under-reporting your gain, as I don’t think that HMRC allows you to increase your cost base for accumulation distributions.

I may well be wrong about this - please correct me if I am. As far as I can see there is no way to record accumulation distributions so that dividend, total return and cost base are all correct. If I’m right about that it feels like a major drawback for UK users of Sharesight.

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@JayZed73 this was the best explanation I could find: https://monevator.com/income-tax-on-accumulation-unit/

Note the summary:

Capital gain = Net proceeds minus original acquisition cost minus accumulation income plus equalisation payments

So the cost base, is original acquisition cost plus accumulation income minus equalisation payments.

Please do feel free to clarify / query further though - as you say, this isn’t nice at all to model in Sharesight, and I may still have gotten this wrong - though it does seem to tie up with my one broker that actually bothers to do the calculation for CGT purposes.

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@Shelving7129 Thank you! You are absolutely right. This is very helpful, and it’s made the position much clearer to me.

(For any other UK users querying this, the relevant HMRC guidance is in the Capital Gains manual at CG57707 - Unit trusts: accumulation units - HMRC internal manual - GOV.UK, specifically the sentence “The notional distribution is treated as allowable expenditure where it is subject to Income Tax in the hands of the unit holder.”)