Sale and Repurchase of Shares - CGT

[regmolehusband]

Not strictly business but I'm sure some of you guys have some investments knocking about and might be familiar with sale and repurchase to mitigate future CGT liability.

I've been fortunate enough to have some investments (non AIM/non ISA) grow in excess of the CGT allowance this year and I read a brief article about what used to be called Bed and Breakfasting. Theoretically if I sell enough to cover the CGT allowance of £8200 and then get my wife to repurchase them immediately then I'm making use of the allowance and resetting the purchase value for future CGT consideration. Sounds good to me!

Is this practice commonplace and are there any downsides? I thought about the impact on non-business asset taper relief but the above must outweigh that considerably.

Ta
"Reg"

[Big Al.]

Or course you could always give your wife half the shares, then you will both have the 8K CGT allowance.

[Eric Mc]

Any artificial scheme set up to reduce tax liabilities will be disallowed by the Inland Revenue. They could tackle such manoeuvers through a number of avenues. As you already mentioned, Bed and Breakfasting is no longer allowed. Secondly, the Revenue are very wary of schemes involving spouses or family members, which they regard as "settlements".

If you have concocted a scheme, you are now obliged to obtain prior approval from the Inland Revenue before carrying out the transactions.

[regmolehusband]

I don't think I've concocted it Eric. if you do a search like "share sale and repurchase CGT" I think you'll find the spouse arrangement is quite well known and documented.

[Eric Mc]

And probably ripe for attack from the Inland Revenue.

"Settlements" are priority targets for Gordon at the moment.

[Mark.S]

I remembered reading about this practice being stopped a long while ago. Bit of digging and...

www.whitingandpartners.co.uk/Content/Bed_and_Breakfasting_post_April_1998.htm
www.moneyworld.co.uk/features/2002/f030402_investment_12.html

2nd link implies that its ok if your partner buys them back but I'd be careful!

[regmolehusband]

No, it's Bed and Breakfasting that been stopped. Selling them one day and buying them back the next.

[Size Nine Elm]

regmolehusband said:

No, it's Bed and Breakfasting that been stopped. Selling them one day and buying them back the next.

IIRC you can buy them back, but only if you wait over 30 days before doing so.

Possible losses or gains in that period, but if share prices are relatively stable this should not be too much compared with an £8200 tax relief.