Bed and Isa

danm

Guys,

Maybe a stupid question. Are there any restrictions in doing a Bed and Isa transfer on Non-UK stocks.

TD Direct don't allow, but i am unclear if this is a limitation of their offering or a rule.

i can fund the account with alternate funds and expect i'll end up paying dealing charges on both sides of the trades, but want to make sure i will not trigger any issues.

thanks in advance.

bowlhead99

Bed-and-Breakfasting in tax parlance refers to selling your shares one night and buying them back the next morning, creating a tax loss (or gain, which might be within your allowance) but still ending up with the same shares.

HMRC don't want you to do that, so they created the "30-day rule" whereby if you buy them back in the 30 days after selling them, the re-purchases are matched to the sales and so you don't actually achieve your objective of creating a big tax gain or loss.

There are a number of ways to 'beat the system' which have been affectionately named:

Bed and ISA (sell the shares for cash and use cash in your ISA to immediately buy them back within the ISA where the taxman will not see them or care about them).

Bed and pension / Bed and SIPP (sell the shares for cash and use cash in your self-invested personal pension to buy them back within a pension wrapper where the taxman will not see them or care about them)

Bed and Spouse (sell the shares for cash and then have your spouse buy them 'back' in their own name so the transactions are not matched)

As Bed & ISA is a popular thing to do, some providers will give you a cut price deal to sell your shares, move the resulting cash to your ISA, and spend that money buying as many shares as they can afford within the ISA. They might for example just charge you a broker fee on the sale or just on the purchase, and they will do the work for you rather than you needing to log in and instruct the trades and action the transfers etc.

If you are using thinly-traded shares with less of a ready market or less ability for the ISA provider to mix your shares with someone else's order to make a bigger order and save brokerage costs on the deal, they may not offer the automated service. Like for foreign markets for example.

However if they don't offer that service, you can of course sell your unwrapped shares yourself, and buy the same or similar shares in your ISA at the same time or a little later. That is your choice as an adult and a free member of society.

What sort of 'issues' were imagining it would 'trigger'?

The tax consequences, whether the ISA provider helps you out with a deal or a special account feature or doesn't, are the same.

danm

Thanks for the helpful response.

The only issue/ question was whether you wer permitted to do it on international stocks..... Asking the question as my broker (td) do not offer the 'facility' on intl stocks, but they do on UK stocks (with the perk of a one sided dealing commission).

As you say, I can replicate the same on liquid stocks.... But may need to pay fees on both the buy and sell. Must just be an oddity with TD.

bowlhead99

danm wrote: »

The only issue/ question was whether you wer permitted to do it on international stocks.....

Well, how could you not be permitted?

As an owner of international stocks you are permitted to sell those international stocks.

As a person with an ISA you are permitted to purchase international stocks in an ISA (assuming they are listed on a recognised exchange).

So, you are permitted to sell your international stocks and buy the same type of international stocks inside an ISA, because the taxman or the government can't prevent you selling your personal property, and will not stop you buying allowable international stocks within an ISA.

Asking the question as my broker (td) do not offer the 'facility' on intl stocks, but they do on UK stocks (with the perk of a one sided dealing commission).

So, the broker will not automate it for you and give you a perk of a reduced fee. That's their right, just like you have the right to choose a different broker.

Many brokers do not even deal with international stocks in the first place. I expect very few offer an automated deal at a sweet price to sell international stocks, change the currency to sterling, contribute the sterling to an ISA and then buy international stocks in the ISA.