Why don't gilts attract CGT?

Ciprico

Is there a technical reason ? or could a govt change this policy on a whim...?

Mark_d

I believe you generally do pay CGT on gilts, with the exception of certain specified issues.

Hoenir

Selling Gilts is how the UK Government of the day funds the borrowing requirement. Anything which changes their relative attractiveness would result in the markets pricing them lower to compensate. Resulting in an addtional servicing cost i.e. interest. 

zagfles

Mark_d said:

I believe you generally do pay CGT on gilts, with the exception of certain specified issues.

Where do you get belief from? 

Taxation (dmo.gov.uk)

InvesterJones

Ciprico said:

Is there a technical reason ? or could a govt change this policy on a whim...?

I presume that'd be a route for people to pay above par at issuance, get all the benefit from the coupons, then redeem at par and then be able to bank a capital loss.

boingy

Ask the question again after the budget! 

Bobziz

boingy said:

Ask the question again after the budget! 

Not sure a government that is looking to raise money would seek to make lending to it less attractive 🤔

Hoenir

InvesterJones said:

Ciprico said:

Is there a technical reason ? or could a govt change this policy on a whim...?

I presume that'd be a route for people to pay above par at issuance, get all the benefit from the coupons, then redeem at par and then be able to bank a capital loss.

At issuance why would investors want to guarantee a capital loss? 

InvesterJones

Hoenir said:

InvesterJones said:

Ciprico said:

Is there a technical reason ? or could a govt change this policy on a whim...?

I presume that'd be a route for people to pay above par at issuance, get all the benefit from the coupons, then redeem at par and then be able to bank a capital loss.

At issuance why would investors want to guarantee a capital loss? 

To get the coupon payments.

zagfles

InvesterJones said:

Hoenir said:

InvesterJones said:

Ciprico said:

Is there a technical reason ? or could a govt change this policy on a whim...?

I presume that'd be a route for people to pay above par at issuance, get all the benefit from the coupons, then redeem at par and then be able to bank a capital loss.

At issuance why would investors want to guarantee a capital loss? 

To get the coupon payments.

Which are taxable as interest, so what circumstances would this make financial sense? There be some obscure ones but generally it won't make sense from a taxation POV to get a high taxable interest with a capital loss even if it offset capital gains. 

wmb194

InvesterJones said:

Ciprico said:

Is there a technical reason ? or could a govt change this policy on a whim...?

I presume that'd be a route for people to pay above par at issuance, get all the benefit from the coupons, then redeem at par and then be able to bank a capital loss.

Yes. In the right circumstances you could also buy way above par in the secondary market and then manufacture a capital loss whilst making an overall profit with the coupons. 

At the moment it's hard to find good examples now that everything's close to par but for instance TR21 8% used to trade way above par. It would have been like falling off a log to lock in a guaranteed positive YTM and a stonking capital loss to use against e.g., gains from your equities.