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CCH Trust Accounts
Sale of Fractions
The document explains the Capital Gains Tax (CGT) treatment regarding the sale of fractions, similar to sales rights below 5%. It highlights complications that may arise during demergers, particularly when sales occur concurrently with acquisitions, leading to CGT calculation issues. If the sale of fractions is recorded after an acquisition, a message indicating no prior transactions may appear. To resolve this, it advises adjusting the transaction date to one day later. A table summarizes the CGT/accounting rule related to the sale of fractions.
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CCH Trust Accounts
Sale of Rights
This document outlines the process for entering a Sale of Rights based on whether a client has a nominal ledger. It details movement codes (SRT, SR5, and SRG) used for transactions, and their implications for capital gains tax (CGT) and accounting rules. For clients without a nominal ledger, different codes are applied depending on proceeds. For clients with a nominal ledger, the SRG code allows for automatic calculation of market value. The document also discusses methods for determining market value, emphasizing the choice between using the First Day Price or entering the market value directly in specific cases.
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CCH Trust Accounts
Revaluations
The document discusses the process of revaluing a holding without influencing Capital Gains Tax (CGT) upon disposal. It details using an A1 purchase with zero units, which appears on CGT reports without altering the CGT cost if no other entries exist for that day. The investment schedule reflects this entry as zero unit acquisition. Furthermore, for downward revaluations, a negative amount should be recorded, and the logged account should be designated as the Revaluations account.
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CCH Trust Accounts
Offshore Income Gains
The document discusses the taxation of offshore income gains in the UK, detailing changes made since 1984 that prevent converting income into capital gains to avoid tax. It explains how the Inland Revenue categorizes Non-Distributor Funds and outlines the required procedures for handling these gains, including the need for specific attributes and movement codes in financial software. The document emphasizes the importance of correctly identifying and manually processing income gains and losses to ensure compliance with tax regulations.
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CCH Trust Accounts
New Issues
The document outlines rules for accounting and capital gains tax (CGT) treatment of share purchases. It specifies that fully paid shares issued for a single payment are treated as a normal purchase under code A1. For shares paid by instalment or partly paid, the initial purchase uses code A5 for the first call and code A6 for subsequent calls. It notes that indexation starts automatically with the A5 and A6 codes if the interval between calls is under 12 months, except in specific privatisation cases or inter-spousal transfers where the CGT Override Date may be needed for accurate indexation.
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CCH Trust Accounts
Equalisation
This document explains the mechanism of equalisation payments in unit trusts, which compensates for discrepancies in distributions among unit holders based on their holding periods. It outlines how unit trust units are purchased directly from the trust, with an increased purchase price reflecting accrued income. The distribution is uniform for all holders, but Group II holders receive part of it as an equalisation payment. Technical details on recording equalisation in Trust Accounts and CGT implications are also provided, highlighting its manual entry and potential accounting considerations.
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CCH Trust Accounts
Enhanced Scrip Dividend
The document outlines the procedure for entering enhanced scrip dividends, highlighting two key differences from regular stock dividends. It explains that choosing stock does not involve cash fractions, and clients might select stock for its perceived value, opting to sell immediately for cash. The document details movement codes and corresponding accounting rules for cash and stock choices, including scenario handling when using Autopost. Ultimately, clients must decide between cash and stock options, along with the potential immediate sale of chosen stock.
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CCH Trust Accounts
Cost Write-down
This document outlines three types of cost write-downs: COW (apportioned), CWD (single date), and CRD (partial transfer out). It details the differences between A1 and A4 write-downs, emphasizing allocation methods, effects on current holdings, and indexation calculations. A1 write-downs require manual allocation and affect holdings, while A4 write-downs are automatically allocated and do not affect current holdings. The document advises using A1 for specific adjustments and A4 for broader write-downs, particularly in contexts like capital reorganizations and demergers.
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CCH Trust Accounts
Backdated changes to Investment entries
The document discusses the ability to amend or delete investment transactions retrospectively, leading to recalculations of profits and losses. It highlights that certain transaction types, such as rights and bonus issues, maintain historical data that are not automatically updated when changes are made. Hence, these entries might need to be manually edited or re-entered following any backdated alterations.
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CCH Trust Accounts
Accumulation Units
This document explains the accounting treatment for unit trusts that reinvest income instead of issuing new units. It details the required entries for recording reinvested income, using a suspense account instead of a bank account, and outlines the two types of cost write-ups: CWU for new units and A4 for existing units. A table summarizes relevant movement codes and their corresponding accounting rules, indicating the handling of dividends and adjustments to investment costs based on whether new units are issued.
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CCH Trust Accounts
Accrued Interest
The document discusses the process of calculating accruals for income, specifically interest, that has accumulated until the end of the financial year. It mentions that this calculation is reversed at the start of the next financial year. Additionally, it outlines movement codes ACD and ACI used for dividends and interest accruals, along with applicable CGT rule codes V3 and V4. A distinction is made between accrued interest and accrued income.
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CCH Trust Accounts
Accrued Income
The document discusses the treatment of accrued income in relation to fixed interest stock transactions, highlighting differences in handling for clients with and without a nominal ledger. It explains how accrued income is affected by the timing of interest payments and emphasizes its distinction from accrued interest. For clients with a nominal ledger, accrued income can be used for both tax and accounting purposes through specific entry methods. The investment schedule reflects accrued income based on the client's setup, detailing its visibility according to accounting preferences and requirements.
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CCH Trust Accounts
1982 Pool Transactions
The document outlines two methods for handling 1982 Pool Transactions: individual transactions and a single indexed pool transaction (P82). Individual transactions require completing the full history with 1982 Market Value, while P82 transactions pool all values with specific movement codes. It highlights the limitations of both methods, especially regarding the correct capital gains tax (CGT) calculations when shares are sold. Users are advised to enter individual transactions or use the A1 rule for better accuracy when necessary, with caution needed for scenarios involving losses or complex capital events.
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