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Switching To Commission Free Funds?

"I looked at the UK investment market and thought it could do with a shake-up."

Tom Russell InvestSmart

Thursday 1st January 1970

Switching To Commission Free Funds?


...Then Be Careful Not To Trigger A Capital Gains Charge.

Before the FSA’s ban on commission nearly all unit trusts and stocks and shares ISAs included a trail commission built into the plan. 


capital gainsSince January most fund managers have offered the alternative of commission free funds. Many Independent Financial Advisers are recommending that their clients switch into these new funds, charging a service fee to replace the lost trail commission.

The HMRC has recently confirmed that switching from a fund paying trail commission to a new commission free fund constitutes a disposal for Capital Gains Tax purposes. A liability for CGT on any profits will therefore arise. It appears that most IFAs are blissfully unaware of the rule, and have assumed that there are no tax implications. InvestSmart’s  advice is to check your position carefully before making a switch.

We understand that the HMRC is currently reviewing the rules and intends to make changes regarding fund switches and CGT in May or June this year. Hopefully this will help to clarify this complex area.