Bed & Breakfasting Shares

5th April 1998

On 5th April 1998 the Chancellor introduced new share matching rules, which restrict the ability of individuals and trusts to ‘Bed and Breakfast’ their quoted shares.

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 (on a first-in first-out basis),
  • The “Section 104” holding (all other acquisitions, pooled).

“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 private client tax partner Barbara Nicholas. “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 Blogs in Private Client Tax
 
Mark Burrows
16th August 2017 Do Company Directors have to file a Tax Return?

    The First-Tier Tribunal recently decided that HM Revenue & Customs were wrong to assume that all Company Directors are required to complete a Self Assessment Tax Return (Mohammed Salem Kadhem v HMRC). The taxpayer appealed against HMRC penalties for failing to submit his Tax Return because he owed no tax – the only…

Read More »

Jodie Tarbin
10th August 2017 HMRC’s latest update confirms acceptance of tax calculations from agents

  HMRC’s latest Agent Update announces their plan to withdraw paper copies of the SA302 (for mortgage application purposes) for taxpayers whose self-assessment tax returns are submitted by an agent.  This will take effect from 4 September 2017. To date we have been calling HMRC in order to obtain a paper copy of a client’s…

Read More »

Barbara Nicholas
10th August 2017 HMRC scam alert

  A number of our clients have been on the receiving end of bogus calls/emails purporting to be from HMRC – either threatening legal action for unpaid taxes or offering refunds. Our experience is that these can be very well drafted and the telephone scams in particular have fooled a couple of our clients, one…

Read More »

Barbara Nicholas
30th June 2017 Non-Resident Capital Gains Tax Returns – penalties eased

Since April 2015 non-residents selling UK residential property have been required to report the disposals within a Non-resident Capital Gains Tax return within 30 days of the conveyance.  You can view HMRC’s guidance here The timeframe is very tight – some may think unreasonably so, especially since many individuals are unaware of this requirement until…

Read More »

Richard Alecock
30th June 2017 Setting up your ‘Personal Tax Account’

As part of the move from Self-Assessment to Making Tax Digital (MTD), HMRC are encouraging taxpayers to set up their ‘Personal Tax Account’. Once MTD is underway, the Personal Tax Account will be populated with taxable income from various sources, including employment/pension income, bank and building society interest, and dividends from quoted companies. The account…

Read More »

Neil Groom
27th June 2017 A taxing calculation

Calculate your own tax… The introduction of the so-called dividend and savings allowances from April 2016 was intended to reduce the tax liability for taxpayers with modest dividend and interest income, possibly removing them from the need to prepare a tax return altogether. For other taxpayers however, the interaction of these changes, together with the…

Read More »