Bed and breakfast share sales
The term bed and breakfasting (sale and repurchase) of shares refers to transactions where shares are sold and bought back the next morning. This used to have Capital Gains Tax (CGT) benefits by crystallising a gain or a loss but is no longer tax effective over such a short period. The change to the rule happened in 1998 when new legislation introduced special share matching rules. Under these rules there are a number of limitations including a 30-day waiting period before the shares can be repurchased.
However, it is possible under certain circumstances to use a modified bed and breakfasting type of arrangement to sell an asset and buy it back again a short time later. A gain could be created in order to use up the annual exempt amount, or a non-resident may bed and breakfast their chargeable assets to establish a higher base cost before they enter the UK tax regime.
We would recommend you seek our advice before undertaking any such transactions to ensure that all tax aspects have been considered. For example, for any bed and breakfast transaction to be effective, there must be a genuine transfer of beneficial ownership of the asset and the share matching rules must be met.
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The content produced and presented by Streets is for general guidance and informational purposes only. It should not be construed as legal, tax, investment, financial or other advice. Furthermore, it should not be considered a recommendation or an offer to sell, or a solicitation of any offer to buy any securities or other form of financial asset. The information provided by Streets is of a general nature and is not specific for any individual or entity. Appropriate and tailored advice or independent research should be obtained before making any such decisions. Streets does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of obtaining Streets' visual or audible content.
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The content used by Streets has been obtained from or is based on sources that we believe to be accurate and reliable. Although reasonable care has been taken in gathering the necessary information, we cannot guarantee the accuracy or completeness of any information we publish and we accept no liability for any errors or omissions in material. You should always seek specific advice prior to making any investment, legal or tax decisions.
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