Bed & ISA - Few Questions

capital0ne wrote: »

jon52 wrote: »

. Are we allowed to sell say "Stock B" held in ISA account, worth similar amount of around £40K and repurchase this in the general investment account thus freeing up cash in ISA. This will enable me to Bed & ISA "Stock A". Not sure if this is possible though.

3. I don't see how this frees up cash in your ISA, the only cash is from the sale in point 1.

Clearly if he has just disposed of £40k-worth of his company B shares within his ISA because he no longer needs to hold them there, he has "freed up" £40k of cash within his ISA. He can then use that free cash to buy other things that he'd like to buy inside the ISA. Such as, the Company A shares that he would like to buy inside the ISA having sold some outside it.

4. Bed and ISA is of course available if you have NOT used your ISA allowance. Bed and ISA is new money money going into an ISA, just because you may have funds in the ISA to buy the bedded shares is not relevant.

Simples.

If you want to impose a special definition on Bed and ISA and decide that to you, it involves putting new money into an ISA, that's absolutely fine for your own affairs.

However for the rest of us, the phrase "Bed and ISA" means selling a security outside a tax wrapper and then re-buying that asset inside an ISA, so that the sale transaction is not matched with the purchase transaction [as could have been the case if both the sale and purchase occurred outside a tax wrapper - a so-called "Bed and Breakfast" set of transactions]

Many people doing bed and ISA transactions will fund the purchase with the sale proceeds having just subscribed it into the ISA, because they don't have any other spare money with which to do the purchase. Other people have plenty of other funds (or can free some up)...

Simples

grey_gym_sock wrote: »

the OP is contemplating doing a "bed & ISA" with company A shares. but what should we call what they might do with company B shares, viz. sell the shares inside an ISA, and (at approximately the same date - let's say: within 30 days) buy the same shares outside any tax wrapper? i think we could call this a reverse bed and ISA.

The 30 days has to be totally irrelevant there because there is no time limit coming from the CGT regulations as there is no sale subject to CGT. There might of course perhaps be a desire to minimise the time "out of the market". I would probably just call this process of "buying some shares outside a tax wrapper" by a simple name: buying some shares...

what about the combined operation, of a bed & ISA with company A shares, and a reverse bed & ISA with company B shares, in which the proceeds of selling company A shares in a taxable account are used to buy company B shares, and the proceeds of selling company B shares inside an ISA are used to buy company A shares?

Is one of the companies the NASDAQ- listed homewares retailer that trades under ticker BBBY?

If so, you could call it a Bed, Bath and Beyond.

Tom99 wrote: »

How come 'no fees' or 'vastly reduced fees' unless your trading platform has some sort of special deal when you bed and ISA. If its a share you are moving you will have a buy/sell spread, stamp duty and at least some sort of trading fee.

Yes, what he is saying is that he has seen a number of brokers offer promotional 'bed and ISA' deals where they will sell an asset in your general investment account and use the proceeds to buy it back in your ISA for you - handling the admin and, where the asset is traded on an exchange, maybe only charging you for the market sale or market purchase but not both. Sometimes even for no fees, if the broker is feeling generous or there's no dealing because it's not happening on a stock exchange. It's something brokers offer to help their customers out and encourage them to stick around rather than sell up and defect to rivals.

You are right that stamp duties and spread (or price movement) mean that you might not end up with as many shares in the ISA as outside it. If dealing with open ended funds without duties and with only one price per day, the chance of that is reduced.

But basically, as Capital0ne has picked up his investment terminology from reading the marketing literature of brokers, he believes that the process they promote and offer in their "reduced fee bed & ISA deal" is the only circumstance where you should use the terminology "bed & ISA".

He thinks that if you manually sell shares outside an ISA and then acquire the same shares inside an ISA, to beat HMRC's anti- Bed&Breakfasting rules, that isn't something you can call Bed & ISA, even though the rest of the investment community do call it that. In his world, you should only call it bed & ISA when you take a cheap deal from your broker to have them do a sale, ISA subscription and re-buy, because that's what the broker calls that process in its marketing bumpf.

capital0ne wrote: »

What I'm saying is that bed and isa is the same as new money going into your isa. It uses your isa allowance the same as new money going into an isa, all you save is on dealing fees.

That's the process the broker offers you on their marketing deal. They want to encourage you increasing the amount of money they're looking after for you in their ISA product and so putting share proceeds into the ISA and using up the subscription allowance is one way to do it.

But the 'Bed & ISA' terminology simply means buying back the sold shares inside an ISA to keep beneficial ownership of the assets while avoiding it being Bed & Breakfasting. If you already have some free cash within your ISA there's absolutely no need to introduce any new money into the ISA whether from the sales proceeds or from your own bank account, and if no cash/proceeds get put into the ISA you don't need to have any spare subscription allowance.

Instead of bed and isa, you could sell your shares in company A held in a normal trading account.
Move the proceeds of the sale into your isa - uses up your isa allowance
Buy the same shares back in your isa

Each trade will attract a fee. Bed and isa results in no fees or vastly reduced fees.

The process you described in the first three sentences (selling, moving proceeds, buying back) *is* Bed & ISA.

What you described as resulting 'in no fees or vastly reduced fees', is a broker pricing structure to help people accomplish Bed & ISA through a special pricing structure and some automation in the process.