How does section 99B of TCGA 1992 prevent double taxation on accumulation units?

Section 99B allows reinvested income on accumulation units to be added to the base cost as allowable expenditure. Because the income has already been taxed as income in the unit holder's hands, adding it to the base cost prevents the same amount from being taxed again as part of the chargeable gain on disposal.

What conditions must be met for reinvested income to qualify as allowable expenditure under section 99B?

Three conditions must all be satisfied. The amount must represent income from investments held within the unit trust scheme. It must have been reinvested without new units being issued. It must have been charged to income tax as the holder's income, or taken into account as a receipt in calculating profits, gains or losses for income tax purposes.

When is the allowable expenditure under section 99B treated as incurred?

For authorised unit trusts, the expenditure is treated as incurred on the distribution date for the relevant distribution period as defined in regulations under the Finance (No. 2) Act 2005. For all other unit trust schemes, the expenditure is treated as incurred on the actual date the amount was reinvested in the fund.

Does section 99B apply to units held in offshore funds?

Section 99B does not apply to disposals of units in an offshore fund that qualifies as a transparent fund under the Offshore Funds (Tax) Regulations 2009. Transparent offshore funds are subject to their own separate rules for computing gains, which are found in section 103D of the Taxation of Chargeable Gains Act 1992.

Taxation of Chargeable Gains Act 1992 section 99B

Calculation of the disposal cost of accumulation units

Section 99B explains how reinvested income on accumulation units in unit trust schemes is treated as allowable expenditure when calculating chargeable gains on disposal.

Accumulation units do not pay out distributions; instead, income is automatically reinvested in the fund, increasing the value of existing units without issuing new ones
The reinvested income qualifies as allowable expenditure (adding to the base cost of the units) provided it has been subject to income tax in the unit holder's hands or taken into account as a taxable receipt
For authorised unit trusts, the expenditure is treated as incurred on the distribution date for the relevant distribution period; for other unit trust schemes, it is treated as incurred on the actual date of reinvestment
This treatment does not apply to units in offshore funds classified as transparent funds, which are instead dealt with under separate rules in section 103D

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