While I agree with much of what Bill Jamieson writes in his “Don’t see double” article (Perspective, 26 August), I fear that consolidating a spread of arguably similar investment trust shares into only one or two holdings can unfortunately lead to capital gains tax (CGT) problems.
Firstly, there are the potentially taxable capital gains on the realisations to be considered – although most investors (myself included) will probably have potentially offsettable losses that can be realised.
But the greater problem for the future is more likely to be the additional complexity introduced into the sensible practice of trying each year to realise at least the annual tax-free CGT allowance, which is a £10,900 gain per person for 2013-14.
The problem arises from the HMRC requirement to “pool” all holdings of any investment in the event of a disposal, so that any realisation has to be pro-rated across all prior purchases of that share when calculating the taxable gain, or exempt allowance.
So, if investment is concentrated into a few larger holdings of investment trust shares, these will inevitably tend to have been acquired (and/or partially disposed of) at various times in the past, thus requiring a myriad of pro-rated calculations on every disposal.
I therefore strongly suggest that investors look carefully into this aspect before following what is otherwise potentially very sound advice.