Capital Gains: Losses and time limit?

Leakingtile79

Hello All,

As the financial year is approaching, I have been doing some calculations. Currently, I have some capital gains for this year over the personal allowance of £3000 due to shares sold through the year. In order to go under this threashold for the year, and avoid (delay) paying taxes, I was thinking about selling some shares I own in a US based company, currently trading below my average purchased price, to materiualise some losses so that I dont pay capital gain tax for this year. I am not aware of any restriction by HRMC in doing this with no time limit, e.g., I sell the shares today to materialise the losses, and buy them again tomorrow, as I want to keep that position, virtually not modifying my holdings in that company.

Is this the case, and there are no restrictions in doing this (like you cannot buy the same assest for X amount of time to be able to claim the losses)?

PD: This is outside of an ISA

wmb194

https://forums.moneysavingexpert.com/discussion/6659103/capital-gains-losses-and-time-limit

There is a restriction: look up the 30 day rule. You can realise the loss but you can’t just buy them back the next day and use the loss: you effectively unwind the transaction.

https://www.gov.uk/government/publications/shares-and-capital-gains-tax-hs284-self-assessment-helpsheet/hs284-shares-and-capital-gains-tax-2021

poseidon1

The only way you can retain a position in the US company after the sale and benefit from the realised loss, is if you have cash within your stocks and shares ISA to buy back the holding as an ISA investment.

This is known as 'bed and breakfast ISA'.

Failing this buy back option you are caught by the forestalling provisions mentioned by @wmb194.

EthicsGradient

And holding the US company may not be possible in the ISA - since ISAs only allow you to hold cash in sterling, buying a particular US stock may or may not be possible. Check with your ISA provider first (and there will be foreign exchange fees if it is allowed).

If it is, and the fees aren't off-putting, then what you are allowed to do is sell a different stock ("B") in the ISA for the same amount as you sell of the US company outside the ISA, then at once purchase that amount of "B" outside the ISA, and buy the US company inside the ISA. The 30 day rule never applies to purchases inside an ISA.

Leakingtile79

Hello All,

Many thanks for your responses. @wmb194, I wasnt aware of the b&B rule, it is good to know, many thnaks for this link too.

@poseidon1 and @EthicsGradient , thanks for making the ISA point there too. I am not interested in buying the company shares in the ISA (My broker allows it, but my ISA allowance for the year is gone). The way I was planning to carry out this operation is through options, selling the shares today and buying a call for may2026, which means the B&B rule doesnt apply and I keep the right of the shares too.

Many thanks

DRS1

Somehow I doubt the option route will work the way you want it to.

Leakingtile79

Hello @DRS1 ,

Could you explain why you have concerns about the option strategy, please? I explain below how this will be executed:

-Step 1: Sell shares and sell a put option at a higher strike to secure the current price (Put contract exp. date over 30 days away).

-Step 2: Time passes, put gets executed by that date.

-Step 3: Losses have been relized, and have the same position I used to have.

There is an additional option to do this operation, which is to buy the ADR or the company listing in other market. ALthough the same company, they have a different ISIN, so for tax purposes they are a different product. Obviously, this has limitations (company needs to be listed in 2 markets, relative good liquidity of shares…)

DRS1

I must admit I was assuming you would buy a call option. How can you know a put option would be exercised?

I had in mind this page

CG55536 - Traded options: tax treatment: summary - HMRC internal manual - GOV.UK

I may be wrong but it seemed to me that if the option and the share acquisition are treated as one transaction then you won't have put 30 days between the sale and the repurchase. Others on here undoubtedly know more about this sort of thing than I do but the use of options is so obvious that I don't see they'd leave such a loophole unfilled.