EBS Summit Growth Fund & Capital Gains Tax

Hi there,

I'm seeking a little help on a situation i find myself in with regard to a recent partial encashment on an EBS Summit Growth Fund.

Background:
Upon cessation of the government led SSIA in 2007 (which was all the time invested in the same fund) I had made total contributions of €13688. The government contributed an additional €3422. Total:€17110
This had been invested in the EBS Summit Growth Fund and had a maturity value of €23590.
23% capital gains was paid (rate at the time) of €1490.54. Net value of €22100.07 was reinvested into the same fund and I continued contributions of €254 for the next 33 months (total €8382) until January 2010. This made total contributions of €30482.07. Units held were 20385 in total at an average purchase price of €1.495 per unit.

On 7/4/2010 I made a partial encashment of €5500 using 4475 units. The fund was worth significantly less on that date than I had paid in.Unit price on the date was €1.229, thus no capital gains tax was liable as it was a loss of €1191.69.

On 15/3/2011 I made a partial encashment of €10000 using 8203 units. Again a loss (unit price of €1.219). Loss €2266.37.

I have received an annual statement every January since outlining the current value of the account and the total sum invested to date. The total sum invested to that point was €14981.47. I had remaining units at that point of 7707.

I made a recent encashment on the 9/2/2015 of €2000. The value of the fund on the date of encashment was €14951.58 - still a loss to my total monetary contributions and I assumed there would be no capital gains tax liable as a result. EBS/Irish Life withheld and paid revenue €187.69. Their calculation is based on the current unit price versus my average unit price paid.
Unit price on encashment 9/2/2015 of €1.94. My average price paid per unit €1.496.
1031 units were encashed meaning a calculated gain of €457.78.

However, this is what I fail to understand. Because of previous encashments in a large loss situation i am now being penalised despite the fact that the value of the account is still less than my total contribution. If i withdrew all my investment now (at a loss or close to equal value of contributions) I think by the EBS/Irish Life standard calculation I would be liable to capital gains tax!

Can I claim a tax credit on the losses incurred on the previous encashments of 2010 (loss of €2266.37) and 2011 (loss of €1191.69)?
Do I have any hope of redress?

I complement you on taking the time to analyse this.I suggest you raise a very pertinent issue and one that relates to a lot of people on this website though they may not know it.I am not an expert in this area but I have always understood that you could carry a Capital Loss forward to offset against future Capital Gains.I just wonder if the Fund Managers do this automatically within the Fund or perhaps the individual does it through Tax Returns

This is interesting. You do not pay CGT on encashments from unit funds. You pay tax under the 'gross roll-up' regime and cannot offset losses against CGT.


The average price of units is irrelavant, as far as I can see, as the procedures for calculating the tax due are provided in the Taxes Consolidation Act 1997 as amended by section 53 of the Finance Act 2000 http://www.irishstatutebook.ie/2000/en/act/pub/0003/sec0053.html#sec53.


And as you can see from this, partial encashments are taxed as (((Benefit –( Allowable Premia*Benefit)/Value of Fund before partial encashment)*Relevant tax rate). There does not appear to be any reference to unit prices. (Unless some other Finance Act subsequently amended the TCA in this regard.)


Each time you make a partial encashment the Act says the allowable premia are then reduced to calculate gains in future chargeable events. What the EBS appears to have done is after your partial encashment of 5,500, they calculated the reduction in allowable premia as (Benefit*Allowable Premia)/Value of Fund, i.e. (5500*30.482)/20,505), i.e. 6,661. This reduced your allowable premia to 23,790, i.e. (30,482-6,661). When you made your second partial encashment EBS appear to have calculated your reduction in allowable premia as ((10,000*23,790)/19,394), i.e. by 12,267 to 11,524. When you made your third partial encashment you had a taxable amount of (2,000-((2,000*11,524)/14,952), i.e. 459 on which tax of 188 is payable. So the reason you are being charged tax is because of the way the EBS are reducing your allowable premia.


Now I'm not a tax consultant and far be it from me to say the EBS are not following the Act but I suggest it would be prudent to ask them how they are calculating the reduction in allowable premia where no gain has been made (i.e. as in your case) and if this is as provided for the the Taxes Consolidation Act 1997 as amended.