'Bed and breakfasting' with shares
Produced in partnership with Rebecca Cave of Taxwriter Ltd (Produced by Tolley)
'Bed and breakfasting' with shares

The following Private Client practice note Produced in partnership with Rebecca Cave of Taxwriter Ltd (Produced by Tolley) provides comprehensive and up to date legal information covering:

  • 'Bed and breakfasting' with shares
  • Why was it used?
  • Current share matching rules
  • Using the spouse or civil partner
  • Using a SIPP or ISA
  • Use an industry replacement

'Bed and breakfasting' is the practice of selling shares and repurchasing them the following day. Although this was most popular prior to 1998, it can still be used in a modified form to achieve capital gains tax (CGT) savings for current or future tax years, subject to careful consideration of applicable anti-avoidance rules.

Why was it used?

Before the share matching rules were changed in 1998 (see below) the acquisition cost of the new shares would not be connected with the disposal value of the old shares. The cost of the new shares would be matched with the subsequent disposal of those new shares perhaps many years in the future. The exercise of buying and selling shares of the same company and class would achieve an uplift in the base cost of those shares for CGT purposes.

This 'bed and breakfast' procedure was frequently used at the end of the tax year by taxpayers who wished to:

  1. utilise their annual exemption for the tax year

  2. realise gains that could be covered by unused capital losses, or

  3. realise losses and set them against gains for the year that was just ending

Current share matching rules

Shares disposed of are identified with shares of the same company and class acquired by the person making the disposal, in the following order:

  1. shares acquired on the same day as the disposal, by the

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