CGT Question

LULULU1

If I sell some share on 2nd March and this takes me up to my maximum CGT profit of £10k, assuming I then want to "Bed and Breakfast" the share when would the best time to rebuy them.

Would it be in this years tax year ie before 5th April or in next years finiancial year.

Or would it make no difference at all as I am buying them and not selling them

Sorry if this sounds dumb and sincere thanks for any help.


Lulu

CLAPTON

what are you trying to achieve by doing this?

xrjtg

If you plan to re-buy within an ISA to shelter future gains from tax then you can buy at any time. If you only want to crystallise a gain, then repurchase the shares outside an ISA and continue to hold them in the long term, then you need to wait a certain period of time (30 days, I believe) between selling and buying else HMRC will, roughly speaking, pretend that the sale never took place at all, and you won't have crystallised any gains. Research this until you're sure you understand it fully.

There are ways to mitigate the risk of the share price rising between the sale and repurchase. What you want to do is insure against the price rising; in other words, bet that the share price goes up. Spread betting can be used to do this, but, again, be very careful that you understand what you're doing if you decide to go down this route.

LULULU1

Clapton,

What I am trying to do is use my full Capitol Gains for this year and then rebuy the same share.

I know about the 30 day rule.

My question is does it make any difference if I rebuy the share late in this tax year or early next year.

You must get fed up of helping numpties like me so it is greatly apprechaited.

xrjtg

Yes, your 2 March date is suggestive!

I'd assume that the date of disposal would be the important one (in which case there would be no particular advantage to selling at the beginning of March rather than later in the tax year). The whole point of the 30 days is to get them treated as separate transactions, in which case when you buy again shouldn't matter. I also don't believe that current CGT rules can see when you bought the shares, in which case it shouldn't matter when you come to sell them again next time either.

Pachira

"My question is does it make any difference if I rebuy the share late in this tax year or early next year."

It doesn't matter if you rebuy the share later this tax year or early next - so long as you buy back the shares more than 30 days after the original sale (ie anytime after 2nd April) then you will avoid the bed and breakfast rule.

LULULU1

30 Day Bed and Breakfast rule.

Is this inclusive of the date you sell and rebuy. Ie If I want to sell on Monday 28th February exactly what date can I rebuy and stay within the guidelines of the B & B rules.

Thanks

Lu

WHITEVANMAN

I am currently liable to CGT through other activities.
I also have some shares which i have as long investments, I have a small pot available which I am looking to trade in a few shares I have lined up hoping to make a small addition to my monthly income.
However I am having a hard time understanding the bed and breakfast scenario in principle and its effects on my idea.

If My intention was to invest say
£1000 in each of 10 differnt shares.
Trade out of each say if and when a 10% profit is made.

For each trade, all in all out, of the £100 return i intend to allocate 28% for CGT and the 72% as income or funds held for further reinvestment later.

Then say reinvest each of the original £1000 in the ten shares as soon as a buying opportunity arises within 30 days.

How does bed and breakfast rules affect this scenario and does it affect my above calcs regard capital gains.

CLAPTON

WHITEVANMAN wrote: »

I am currently liable to CGT through other activities.
I also have some shares which i have as long investments, I have a small pot available which I am looking to trade in a few shares I have lined up hoping to make a small addition to my monthly income.
However I am having a hard time understanding the bed and breakfast scenario in principle and its effects on my idea.

If My intention was to invest say
£1000 in each of 10 differnt shares.
Trade out of each say if and when a 10% profit is made.

For each trade, all in all out, of the £100 return i intend to allocate 28% for CGT and the 72% as income or funds held for further reinvestment later.

Then say reinvest each of the original £1000 in the ten shares as soon as a buying opportunity arises within 30 days.

How does bed and breakfast rules affect this scenario and does it affect my above calcs regard capital gains.

well if you buy 1000 share 'x' on a certain date 'A'

then you sell 1000 shares on date 'B' then you are potentially liable for cgt based on the gain (i.e. price on sold on 'B' less price paid on day 'A')
however if you then buy 1000 shares in 'X' within 30 days then they are matched with the sale on day 'B' so the gain is that between price of sale on B and price of the buy on C.

the remainding 1000 shares you hold are assumed to have been purchase on day 'A' at that price

I don't see why you intend to invest within 30 days but it makes no real difference to the cgt you pay as you have already used your cgt allowance

WHITEVANMAN

CLAPTON wrote: »

well if you buy 1000 share 'x' on a certain date 'A'

then you sell 1000 shares on date 'B' then you are potentially liable for cgt based on the gain (i.e. price on sold on 'B' less price paid on day 'A')
however if you then buy 1000 shares in 'X' within 30 days then they are matched with the sale on day 'B' so the gain is that between price of sale on B and price of the buy on C.

the remainding 1000 shares you hold are assumed to have been purchase on day 'A' at that price

I don't see why you intend to invest within 30 days but it makes no real difference to the cgt you pay as you have already used your cgt allowance

I had a feeling it wouldnt affect the CGT I had to allow for this year.
Next tax year is going to be different as the only Capital gains will be from my investment funds if and when I switch some.
I also have some longer term share holdings.
My intention with the small pot that I intend to use to trade is not for investing purposes put purely to trade to try to make some small additional income (and partly for fun).
My intention is to keep the Pot at the same value and take some profit as well as keeping some for contingancy against loses, I actually have already researched some potential choices and am looking to keep additional shares in view.
Im not looking to constantly keep buying the same shares over, but if worthwhile dips and trading ranges present themselves I will seek to use them.

In the above example I just tried to keep figures simple and present a situation that could arise at sometime, as to get an idea of how it may work out, as i'm still some weeks off of comitting to this daliance im just trying to get a good head around the principles involved and found the HMRC website information somewhat lacking and confusing as someone who hasnt had to deal with bed and breakfasting before.

I can see I still have some research to do, as even as you explain it above, my brain seems too numb to fully understand and absorb the concept and all the effects it has on the intentions I had.

Pachira

LULULU1 wrote: »

30 Day Bed and Breakfast rule.

Is this inclusive of the date you sell and rebuy. Ie If I want to sell on Monday 28th February exactly what date can I rebuy and stay within the guidelines of the B & B rules.

Thanks

Lu

http://www.hmrc.gov.uk/manuals/cgmanual/cg50566.htm

"The following examples illustrate how the 30 day identification rule works.

EXAMPLE 1
Miss A has a Section 104 holding of 1,000 ordinary £1 shares in X plc. On 1 July 1998 she sells the whole 1,000 shares. She buys the same number of ordinary £1 shares in X plc on 31 July 1998.
The acquisition is within the 30 day period after the disposal, so the disposal and later acquisition are matched in priority to identifying the disposal with the shares in the Section 104 holding.

EXAMPLE 2
Mr B has a holding of 2,500 ordinary 10p shares in Y plc. On 27 March 1998 he sells 1,700 shares. On 30 March 1998 he buys another 500 10p shares in Y plc.
The later acquisition of 500 shares does not become part of the Section 104 holding. They are identified with 500 of the shares disposed of on 27 March. The remaining 1,200 shares sold are identified with part of the Section 104 holding.

EXAMPLE 3
Mrs C has a Section 104 holding of 10,000 ordinary 25p shares in Z plc. On 28 February 1999 she sells 2,000 shares. On 31 March 1999 she buys another 3,000 of the same shares.
Mrs C's acquisition is not within the 30 days after the disposal. So her disposal cannot be identified under the 30 day rule with 2,000 of the 3,000 shares bought on 31 March. The shares disposed of are therefore identified with part of the Section 104 holding.

EXAMPLE 4
Ms D acquired 100 ordinary £1 shares in W Ltd on 20 February 2000. On 30 March 2006 Ms D sells 50 of these shares. She moved to Australia on 10 April 2006 and became not resident in the United Kingdom for tax purposes.
On 15 April 2006 Ms D buys 25 ordinary £1 shares in W Ltd. This acquisition is within the 30 day period but it is not matched with the disposal on 30 March as Ms D was not resident in the United Kingdom for tax purposes at the time of the relevant acquisition."