Personal Tax

‘Bed and breakfasting’ with shares

Produced by Tolley
  • 22 Mar 2022 09:43

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

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

‘Bed and breakfasting’ with shares

‘Bed and breakfasting’ was the pre-1998 practice of selling shares and repurchasing them the following day. This technique can still be used in a modified form to achieve capital gains tax (CGT) savings for current or future tax years using:

  1. a spouse / civil partner

  2. a self-invested pension plan (SIPP), or

  3. an individual savings account (ISA)

There are, however, anti-avoidance rules that need to be considered, as discussed below.

When considering planning of the kind discussed below, the usual health warning applies: you cannot give investment advice unless you are authorised to do so. See the Regulated investment advice guidance note. You can tell the individual about the tax implications of utilising the annual exemption by ‘bed and breakfast’ type arrangements but you must not recommend disposals of specific investments.

Why was it used?

Before the share matching rules were changed in 1998 (see below), the acquisition cost of the new shares were not connected with the disposal value of the old shares. The cost of the new shares was 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 thus 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

Access this article and thousands of others like it
free for 7 days with a trial of TolleyGuidance.

There's no margin for error. Think Tax.
Think Tolley.

TolleyGuidance gives you direct access to critical, comprehensive and up-to-date tax information and expertise you can rely on.


Popular Articles

Purchase of own shares ― overview

Companies Act 2006 allows a company to repurchase its own issued share capital, provided certain conditions are met. This type of transaction is sometimes referred to as a ‘share buyback’ or a ‘purchase of own shares’.The repurchased shares can either be immediately cancelled, which is typically the

23 Mar 2022 10:44 | Produced by Tolley Read more Read more

Taxable state benefits

The majority of state benefits (also called social security benefits) are managed by the Department of Work and Pensions (DWP) via the Jobcentre Plus.Some benefits are dependent on a national insurance contribution record (and different classes of national insurance provide different benefit

25 Feb 2022 15:23 | Produced by Tolley Read more Read more

Capital allowances computations

Plant and machinery allowancesThree types of allowance are available for expenditure on plant and machinery:•the annual investment allowance (AIA), which currently provides a 100% allowance for the first £1,000,000 of expenditure per year, see the Annual investment allowance (AIA) guidance

21 Mar 2022 07:23 | Produced by Tolley Read more Read more