CGT 30 day rule

[Steveam]

I want to make sure I don’t screw-up here

I sold 1000 AZN on Tuesday 26-September to crystallise a large gain. I plan to buy back into AZN (perhaps not the full amount). If I buy tomorrow am I outside the 30 day rule?

My layman understanding is that it’s 30 days after the day after the sale … that is 30 ordinary days so nothing strange like business days or excluding bank holidays).

Best wishes, Steve

[88V8]

My layman understanding is that it’s 30 days after the day after the sale … that is 30 ordinary days so nothing strange like business days or excluding bank holidays).

Yes. Unusually with tax rules nothing devious, it just means 30 days after the sale.

You may know as an exception, if you have capacity in your ISA or SIPP you can rebuy within the 30 days, or if your OH has capacity in sheltered or unsheltered accounts they can buy within 30 days, or indeed on the same day to minimise price change.

V8

[Dicky99]

My layman understanding is that it’s 30 days after the day after the sale … that is 30 ordinary days so nothing strange like business days or excluding bank holidays).

Yes. Unusually with tax rules nothing devious, it just means 30 days after the sale.

You may know as an exception, if you have capacity in your ISA or SIPP you can rebuy within the 30 days, or if your OH has capacity in sheltered or unsheltered accounts they can buy within 30 days, or indeed on the same day to minimise price change.

V8

Am I mistaken here. Surely the expiry of the 30 days has to come within the new tax year otherwise between now and end of tax year you may continue to increase your capital gain twixt now and then.

[88V8]

Yes. Unusually with tax rules nothing devious, it just means 30 days after the sale.

Am I mistaken here. Surely the expiry of the 30 days has to come within the new tax year otherwise between now and end of tax year you may continue to increase your capital gain twixt now and then.

The capital gain - or loss - is crystallised on the transaction date, in the tax year during which you sell.

The 30 day rule is independent of tax year, its purpose was to prevent Bed & Breakfasting where an artificial tax event was created in that the shares were sold but immediately repurchased.

If one repurchases after, say 20 days, then for tax purposes the original transaction did not take place and the taxable gain or loss cannot be claimed. That is the case even if the repurchase is in the next tax year.

V8

[SteelCamel]

If one repurchases after, say 20 days, then for tax purposes the original transaction did not take place and the taxable gain or loss cannot be claimed. That is the case even if the repurchase is in the next tax year.

Not quite. The transaction did take place, but it matches with the re-purchase, not the original purchase. Any gain or loss on this can be claimed. You're correct that the tax year is irrelevant though.

Example - I buy some shares for £1 and hold them for many years. On 30th March 2022 I sell them all for £5. If I left it at that, I've made a gain of £4 per share in the 21-22 year.
However on 10 April 2022 I buy the shares back again for £4. My re-purchase matches the sale under the 30 day rule. As far as HMRC are concerned, I bought new shares on 10 April 2022 and then sold them on 30 March 2022 (despite the fact that this would require a time machine), and I still hold the ones I bought years ago. I've made a gain of £1 per share, and as the sale was in 21-22, that's the year I've made the gain in. The shares I'm still holding have a cost of £1 from the original purchase, which is what the gain would be calculated against when I eventually sell.

[Lootman]

If one repurchases after, say 20 days, then for tax purposes the original transaction did not take place and the taxable gain or loss cannot be claimed. That is the case even if the repurchase is in the next tax year.

Not quite. The transaction did take place, but it matches with the re-purchase, not the original purchase. Any gain or loss on this can be claimed. You're correct that the tax year is irrelevant though.

Example - I buy some shares for £1 and hold them for many years. On 30th March 2022 I sell them all for £5. If I left it at that, I've made a gain of £4 per share in the 21-22 year.

However on 10 April 2022 I buy the shares back again for £4. My re-purchase matches the sale under the 30 day rule. As far as HMRC are concerned, I bought new shares on 10 April 2022 and then sold them on 30 March 2022 (despite the fact that this would require a time machine), and I still hold the ones I bought years ago. I've made a gain of £1 per share, and as the sale was in 21-22, that's the year I've made the gain in. The shares I'm still holding have a cost of £1 from the original purchase, which is what the gain would be calculated against when I eventually sell.

HMRC's treatment does not require a time machine. You are simply regarded as having shorted the security. CGT applies to short positions in the same way as it does to long positions.

Although we usually think of a sale as being a closing transaction, that can also apply to a purchase. So it can be better to think of the opening and closing of a position, which is the terminology used when trading options, rather than a buy and a sell.

Also note that in your example it can sometimes benefit you if you deliberately repurchase the share within 30 days. A large price movement just after the sale might enable you to establish a tax loss by buying it back again within 30 days, say if the share soars higher.

[Alaric]

Also note that in your example it can sometimes benefit you if you deliberately repurchase the share within 30 days

I can think of one other benefit. From time to time, companies do a demerger without a cash option where the demerged share becomes difficult to hold probably because it's quoted on a market not offered by your platform or broker or where the taxation rules become difficult. In those circumstances, perhaps sell cum rights, wait for the demerger and rebuy ex-rights.

[88V8]

If one repurchases after, say 20 days, then for tax purposes the original transaction did not take place and the taxable gain or loss cannot be claimed. That is the case even if the repurchase is in the next tax year.

Not quite. The transaction did take place, but it matches with the re-purchase, not the original purchase. Any gain or loss on this can be claimed. You're correct that the tax year is irrelevant though.

Example - I buy some shares for £1 and hold them for many years. On 30th March 2022 I sell them all for £5. If I left it at that, I've made a gain of £4 per share in the 21-22 year.
However on 10 April 2022 I buy the shares back again for £4. My re-purchase matches the sale under the 30 day rule. As far as HMRC are concerned, I bought new shares on 10 April 2022 and then sold them on 30 March 2022 (despite the fact that this would require a time machine), and I still hold the ones I bought years ago. I've made a gain of £1 per share, and as the sale was in 21-22, that's the year I've made the gain in. The shares I'm still holding have a cost of £1 from the original purchase, which is what the gain would be calculated against when I eventually sell.

Ingenious, although if one's sale was for the purpose of using up the 21/22 CGT allowance, then one has no longer used the allowance.

V8

[1nvest]

If one repurchases after, say 20 days, then for tax purposes the original transaction did not take place and the taxable gain or loss cannot be claimed. That is the case even if the repurchase is in the next tax year.

Not quite. The transaction did take place, but it matches with the re-purchase, not the original purchase. Any gain or loss on this can be claimed. You're correct that the tax year is irrelevant though.

Example - I buy some shares for £1 and hold them for many years. On 30th March 2022 I sell them all for £5. If I left it at that, I've made a gain of £4 per share in the 21-22 year.
However on 10 April 2022 I buy the shares back again for £4. My re-purchase matches the sale under the 30 day rule. As far as HMRC are concerned, I bought new shares on 10 April 2022 and then sold them on 30 March 2022 (despite the fact that this would require a time machine), and I still hold the ones I bought years ago. I've made a gain of £1 per share, and as the sale was in 21-22, that's the year I've made the gain in. The shares I'm still holding have a cost of £1 from the original purchase, which is what the gain would be calculated against when I eventually sell.

If you still hold some of the same shares, bought at £1, and you only sell/repurchase some of those shares, then as HMRC works to a average cost basis then is not the calculated reportable gain (from in effect having shorted on the 30th March, closed the short on 10th April) not a bit more complicated than you've exampled?

[DrFfybes]

If one repurchases after, say 20 days, then for tax purposes the original transaction did not take place and the taxable gain or loss cannot be claimed. That is the case even if the repurchase is in the next tax year.

Not quite. The transaction did take place, but it matches with the re-purchase, not the original purchase. Any gain or loss on this can be claimed. You're correct that the tax year is irrelevant though.
.

Wow - who said this was one of the few times it wasn't devoous?

You say this works both ways?
So if I sell shares and buy them back 2 weeks later at a HIGHER price, does this count as a capital loss I can offset against CGT in the tax year of the sale?


Paul

[Lootman]

Not quite. The transaction did take place, but it matches with the re-purchase, not the original purchase. Any gain or loss on this can be claimed. You're correct that the tax year is irrelevant though.

Wow - who said this was one of the few times it wasn't devoous?

You say this works both ways? So if I sell shares and buy them back 2 weeks later at a HIGHER price, does this count as a capital loss I can offset against CGT in the tax year of the sale?

That is correct. But you are also giving yourself an unrealised gain that is now deferred, but that will eventually be subject to CGT at whatever rate is applicable at the time.

Ultimately it depends on why you sold it in the first place. And whether you can stomach owning it again given that you hated it enough to sell it just 2 weeks earlier.

[pochisoldi]

Wow - who said this was one of the few times it wasn't devoous?

You say this works both ways? So if I sell shares and buy them back 2 weeks later at a HIGHER price, does this count as a capital loss I can offset against CGT in the tax year of the sale?

That is correct. But you are also giving yourself an unrealised gain that is now deferred, but that will eventually be subject to CGT at whatever rate is applicable at the time.

Ultimately it depends on why you sold it in the first place. And whether you can stomach owning it again given that you hated it enough to sell it just 2 weeks earlier.

Potentially useful if you use the loss against a capital gain on property taxable at 28% this year, and then expect to be liable for 10% CGT if/when the shares are sold in a subsequent year.

[DrFfybes]

That is correct. But you are also giving yourself an unrealised gain that is now deferred, but that will eventually be subject to CGT at whatever rate is applicable at the time.

Ultimately it depends on why you sold it in the first place. And whether you can stomach owning it again given that you hated it enough to sell it just 2 weeks earlier.

Potentially useful if you use the loss against a capital gain on property taxable at 28% this year, and then expect to be liable for 10% CGT if/when the shares are sold in a subsequent year.

Similar - it can create a loss in a year you're paying Higher Rate tax and defer the gain until you retire and pay lower tax. I'm thinking about the bed&ISA movements. Not sure how much use it is in practice though.

Paul

[SteelCamel]

If you still hold some of the same shares, bought at £1, and you only sell/repurchase some of those shares, then as HMRC works to a average cost basis then is not the calculated reportable gain (from in effect having shorted on the 30th March, closed the short on 10th April) not a bit more complicated than you've exampled?

I think not, if the amount you sell matches the amount you buy. These match each other, and are never added to the pool of pre-existing shares. If the buy and sell are different sizes, you need to split the bigger one pro-rata, and the left-over transaction affects the pool in the normal way.