CGT on share sales--30-day-rule

sardarji

Presumably, when calculating your Capital Gains in Bloggo plc shares, you must start from the earliest sales in the year, then move on to later sales, to decide which purchases-within-30 days---under the anti-bedandbreakfasting rule---you must 'match with' (to work out any gain/loss) the sale concerned. BUT...

Suppose you sell 6,000 Bloggo on day 1 then sit still, then on day 10 you both buy 6,000 Bloggo and sell 6,000, then buy say 8,000 on day 15. Question: is the day 1 sale , under the 30-day rule, to be matched with the 6,000 purchase on day 10?? Or, instead, with some later purchase, eg (6,000 of) 8,000 Bloggo bought on day 15? Because there is another rule that a sale on any given day is to be matched, firstly, with a purchase on that same day. Which rule has priority?

This is a real question for anyone like me who buys and sells quite often. And the different results, depending which treatment you use, don't necessarily "all come out in the wash", making the final tax total automatically the same. Yet not a syllable does the HMRC pamphlet HS284 about "Shares and Capital Gains Tax" say about it! I hope some expert can give me an answer (and just try ringing up HMRC to see why I turn to MSEForums for one--easier to get through, let alone to a human being, to the far side of the moon). Later: see two entries from me further down about HMRC's version when one does get through!

Elaine_Wilson

You must match transactions on the same day before you look further afield.

So I would say that the buy and sell on day 10 are matched, leaving the sale on day 1 to be matched with part of the purchase on day 15.

But on the information you have given it is difficult to see how this could end up with a different result if you had matched the sale on day 1 with the purchase on day 10 and the sale on day 10 woth the purchase on day 15.

Of course, if these 15 days spanned two tax years then, yes, the difference could be vital.

chrismac1

One easy way around all this for short term punts is to spread bet instead of using the actual shares. Note also that CFDs come under the CGT regime, but spread bets are totally outside it.

sardarji

Yes, I know (a very little) about spread betting, but just don't choose to use it, even though I must be enriching HMRC with umpteen zillions (ok, not quite) in stamp duty by going the stock-market route. Ms Wilson, yes, in several cases the 30-day rule does, for me, span two tax years; so there are questions about last year's 18 percent CGT and thisn one's 28 percent, and/or bringing gains above/below the exempt amount. It was just this that I was thinking of.

chrismac1

You are mad to be punting the market via proper shares and paying stamp duty! Get yourself signed up with 3 or 4 spread bookies, that will give you at least £1,000 in free bets to get you started. Begin very carefully for the lowest possible stakes with each new bookie until you are absolutely confident you understand how the software works, how to place standard stop losses and trailing stop losses. If you trade in gold or S and P 500, beware that 1 betting unit equals 10 actual units so don't do what I did and put your first bet on for 10 times the planned amount!

For shares, you have choices between rolling bets - where you pay a small daily fee to keep the position open - or fixed date expiry bets. If you are money already, well done and this will increase your profit margin. If not, this will reduce your losses and your betting bank will last longer.

Real share investment is something I also do and in my view it's only suitable for at least a 2 month hold. Some core holdings such as Diageo I've held for over 10 years and that one I expect still to hold in 2016. But if the Diageo chart looks crappp, I'll use spread bets as a short term hedge.

sardarji

Please, can any tax expert confirm Ms Wilson's advice? Please don't be offended, Ms Wilson, I was once given the opposite advice by an HMRC "expert". I have already tried again this year to get an answer from the so-called tax advice line of HMRC.

I told the so-called adviser whom I (eventually) got through to that the question is not answered in HS284.
That is a plain and simple fact. HS 284 deals, in detail, with the identification of the shares sold on a given day--first those bought the same day, call it day X, secondly those bought in the next 30 days, thirdly those from the "Section 104 pool". Clear and straightforward, fine. But what HS284 does not do--this is a fact too, or I wouldn't have to waste my time enquiring--is identify which day's dealings you calculate first, those of day X or the same-day dealings of day X-plus-ten.

These are two entirely distinct questions. Yet the HMRC "adviser" concerned, God help him, thought that these are the same question, and that the distinction I drew to him between them is merely semantic. Advice from a man too stupid to see the difference seems to me not worth much.

This is not a trivial issue. Method one means one set of calculations, method two an utterly different set. The tax-burden resulting from the two methods might turn out at the end to be the same, --but the two figures might turn out to differ by hundreds or even thousands of pounds, (Which of course one couldn't know unless one calculated both!).

ceeforcat

Elaine Wilson is correct - and her first line says it all really. Match the buys and sells which take place on the same day and then start dealing with what is left. In this instance the sale on day 1 would be matched with the purchase on day 15.

I have a day trader client who makes around 600 transactions each year on each of four shares, BP, Lloyds, Barclays and Vodafone. Dread the thud of the envelope on my desk every year - I do not think that I could ever charge him enough.

sardarji

Last (and, I'm sorry, fresh) queries to you truly helpful people:

Firstly

---

A) On day 1 I sell 6,000 Bloggo
On day 10 buy 5,000 and sell only 3,000
C) On day 15 buy 8,000.
Question: When matching, under the same-day identification rule, does that mean I match the sold 3,000 of day 10 against 3/5 of the 5000 bought that day , at their average price...
... and then "use up" the remaining 2,000 against my 6,000 purchase of day 1, leaving the remaining 4,000 of that day to be matched against half the 8,000 bought on day 15 ?

Secondly, and much wider---
HS 284 blithely tells me, under the 30-day rule, to identify today's sale of 6,000 with "shares acquired in the 30 days following". But which shares exactly? Ie, does this mean (a) that I go forward purchase-by-purchase until the required 6,000 have been found (ie, in this case 2,000 from day 10 plus 4000 , half the 8,000 of day 15)---
---or (b) that I must lump together all the purchases (same-day matches excluded) made within the next 30 days--say 25,000 shares--and then work out the cost of 6,000 at the average price of all 25,000? And then retire to a monastery...

Thirdly, I suppose by now there is (and accountants use) software that can do all this--but how can one use it oneself, without gigantic re-entering of data, when one doesn't have electronic access to the stockbrokers records of one's deals? What DO accountants do???

Fourth, and no answer needed here: why do HMRC (a) first put out pamphlets to the innocent taxpayer that don't answer very simple, basic questions like the ones I raised at the start of this thread . And then (b) employ as tax "advisers" dimwits who can't even see that those questions arise, let alone give authoritative answers to them?

Just_landed

Thirdly, I suppose by now there is (and accountants use) software that can do all this--but how can one use it oneself, without gigantic re-entering of data, when one doesn't have electronic access to the stockbrokers records of one's deals? What DO accountants do???

---

Have you read the PM I sent you on Wednesday. I spent hundreds of hours trying to sort exactly what your going through, The answers in the PM.

ceeforcat

Firstly:

No this is incorrect. The 6000 sell on day 1 will be set against the 8000 purchase on day 15. You will now have 4000 shares to match- 2000 bought on day10 and 2000 bought on day 15.

chrismac1

If this mess doesn't convince you to open spread betting accounts then nothing will! Or what about CFDs? At least they should be easier to match up, plus they are outside stamp duty even if still within the remit of CGT.