Bed
and Breakfasting Shares - post April 1998
Since 5th April 1998, the Chancellor has introduced
new share matching rules which restrict the ability of individuals
to 'Bed and Breakfast' their quoted shares, in order to crystallise
a gain, to fully utilise their
capital gains tax annual exemption, or to realise a loss.
The new rules require a sale of shares, or other security, to
be matched with acquisitions in the following order:
- same day acquisitions,
- acquisitions within the following 30 days,
- previous acquisitions, after 5th April 1998, on a last-in-first-out
basis,
- any shares in 'pool' at 5th April 1998,
- any shares held at 5th April 1982,
- any shares acquired before 6th April 1965.
"It is the second of the above rules which
stops the traditional Bed and Breakfasting transaction from now
working, and clients should take care not to be caught out by
this rule unknowingly",
commented Ely
office tax manager Kathy Whiting.
"Clients can quite easily sell some shares,
then buy them back within 30 days, not realising that the latter
purchase is matched against the sale".
In some situations, this rule can be utilised to a client's advantage,
to shelter what was thought to be crystallised gains, or to create
a capital loss.
Although the traditional form of Bed and Breakfasting shares is
no longer possible, it can still be achieved by use of a self
select ISA, by one's spouse repurchasing the stock or by creating
a trust.
Other Practical Examples of our Capital Gains
Tax Expertise
- Calculating the capital gain on selling a buy-to-let
residential property.
- Advising on the tax treatment of selling off part of
your garden as a building plot.
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