Capital Loss can I "breakfast and bed" 30 day rule

[548834]

I holding Capital Loss on RBS, I'd like to offset this loss against other stocks that are showing good profits. Fact is the capital gains over £12000 is just less than the RBS loss.

I don't specifically want to sell the RBS, but would like to realize the loss. Therefor If I buy RBS one day then sell the previous RBS on the next day, on the basis of first-in-first-out I make a loss!

Anyone see any flaw in this.

[Gan020]

Your post is a little confused but I will try and help. The 30 day rule is specifically designed to stop people generating losses in the way I think you are describing.

So, for example (ignoring stamp duty and commission for ease of explanation).
Transaction 1 (more than 30 days ago). Buy 40,000@240p = £96k
Transaction 2 today. Sell 40,000@210p = £84k
Transaction 3 tomorrow. Buy 40,000@210p = £84k

Under the 30 day rule Transaction 2 will be matched (or set against) Transaction 3. There is zero gain or loss on the two trades and you do not crystallise the capital loss you are holding in Transaction 1.

In order to crystallise the loss your choices are either:
1. Transaction 3 must be 30 days after transaction 2 (so you will be out of the market on RBS for a month and the share price could move for or against you in this period)
or 2. Transaction 3 must be a different legal entity (your wife, partner, child or a trust etc.)
or 3. Transation 3 could be done in an ISA or SIPP but note £20k limit for a new ISA each year, unless you already have unused funds in your ISA so this is only going to resolve part of your issue.
or 4. One might perceive the price performance of LLOY is likely to be close to RBS, so in Transaction 3 you buy LLOY. You could even sell your LLOY after 30 days and then buy-back your RBS (but not within 30 days)

[PinkDalek]

Briefly to add to Gan020's reply.

I'd like to offset this loss against other stocks that are showing good profits.

They might be showing good profits but until you dispose of any of them CGT does not (potentially) come into play.

[daveh]

I think the OP is saying they bought RBS some years ago and want to book that loss by buying more RBS today and then selling tomorrow. The OP is suggesting that the shares first bought some years ago would be matched against the share sale.

I thought that under the 30 day rule the two recent (within 30 day) purchase and sales would be matched so there would be nothing gained (or lost).

I also thought that if you had two (or more) purchases at different prices and then made a partial sale (more than 30 days after both purchases) you made a pool of the purchases and used the combined cost to determine the base price for capital gains.

[548834]

Thanks guys, think I got the answer reading the posts. ie buying new before selling old is still within the 30 days - the 30 days counts both backwards and forwards.

[pochisoldi]

Thanks guys, think I got the answer reading the posts. ie buying new before selling old is still within the 30 days - the 30 days counts both backwards and forwards.

No that's wrong.
The matching order is
- Same day sales and purchases (same day rule)
- Shares bought against shares sold in the preceeding 30 days (bed and breakfast rule)
- S104 pool
- Any remaining shares (earliest acquisition first)

(Cite: https://www.gov.uk/government/publicati ... s-tax-2019 )

This means that a purchase of 500 shares followed by sale of 500 shares will result in the sale being matched against the S104 pool. (scenario 1)
A sale of 500 shares followed by a purchase of 500 shares within 30 days will result in the sale being matched against the previous purchase. (scenario 2)

Scenario 1:
S104 holding with 1000 shares with a pooled value of £1000 (100p/share)
500 shares are bought on the 1st at a net cost of £250 (50p/share)
500 shares are sold on the 2nd with net proceeds of £250 (50p/share - lucky man the share price went up enough to cover the dealing cost...)
No further dealings in the 30 days prior to the first or 30 days following the last transaction.

The disposal triggers the matching process:
Same day transactions: No match
Sale then purchase within 30 days: No match
S104 pool: Match
The sale on the 2nd: proceeds £250
500 shares from S104 pool: Cost £500
Net loss/gain= Loss of £250

30 days after the last sale, the 500 shares bought on the 1st get added to the S104 pool
The new pool is: old-disposals+purchases.

So £1000-£500+£250 = £750 and 1000-500+500=1000 shares
So each share in the pool is worth 75p.

Scenario 2:
S104 holding with 1000 shares with a pooled value of £1000 (100p/share)
500 shares are sold on the 1st with net proceeds of £250
500 shares are bought on the 2nd at a net cost of £250 (50p/share) (lucky man the share price dipped enough to absorb the dealing costs)
No further dealings in the 30 days prior to the first or 30 days following the last transaction.

The disposal triggers the matching process:
Same day transactions: No match
Sale then purchase within 30 days: The dealings on the 1st and 2nd match
The sale on the 1st: proceeds £250
Purchase on the 2ndl: Cost £500
Net loss/gain=NIL

S104 pool: Nothing left to match, and the S104 pool is left untouched.

PochiSoldi

[mutantpoodle]

you dont say how much over the £12000 CGT allowance the 'gains' are...nor in fact if you have actually established (ie sold at a profit) these gains

you also dont say how big a loss the RBS would be if sold


but........you dont have to sell ALL the RBS...why not just sell enough to reduce 'gains' to below CGTY allowance level

failing that why not 'bed and ISA' ?? that can be done same day and is entirely OK

[PinkDalek]

It looks like the OP does know about Bed and ISA:

viewtopic.php?f=49&t=4692&p=47542#p47542

More info from the OP would be of assistance but from there it does seem the CGT annual exempt amount may usually be in play.

[Gigabeast]

Scenario 1:
S104 holding with 1000 shares with a pooled value of £1000 (100p/share)
500 shares are bought on the 1st at a net cost of £250 (50p/share)
500 shares are sold on the 2nd with net proceeds of £250 (50p/share - lucky man the share price went up enough to cover the dealing cost...)
No further dealings in the 30 days prior to the first or 30 days following the last transaction.

The disposal triggers the matching process:
Same day transactions: No match
Sale then purchase within 30 days: No match
S104 pool: Match
The sale on the 2nd: proceeds £250
500 shares from S104 pool: Cost £500
Net loss/gain= Loss of £250

30 days after the last sale, the 500 shares bought on the 1st get added to the S104 pool
The new pool is: old-disposals+purchases.

So £1000-£500+£250 = £750 and 1000-500+500=1000 shares
So each share in the pool is worth 75p.
PochiSoldi

Oooh, soooo close! But not quite right...
Scenario 1 is indeed "breakfast and bed" which avoids the "same day" and "bed and breakfast" rules, BUT because the shares purchased on the 1st have no sales in the preceeding 30 days to match with, they join the Section104 pool immediately (not 30 days later, I can't think why you applied that). The subsequent sale on the 2nd is then calculated against the total pool, so 500 sold from a pool of 1500 with a total value of £1250 would mean the allowed cost of the 500 sold would be 1250 x 500/1500 = £417, the disposal consideration was £250 so the net loss was 250-417 = £167
Thanks for the scenario example though, it gave me the confidence to check my own example with HMRC on their community forum and they clarified that it works that way.
Best wishes,
Gigabeast

[Gigabeast]

Thanks guys, think I got the answer reading the posts. ie buying new before selling old is still within the 30 days - the 30 days counts both backwards and forwards.

Nope it only counts after a sale, you can't buy the exact same type of share within 30 days of selling it. But you can buy some more (they join the Section104 pool effectively the day after you buy them, or they'd be caught by the same-day rule) and then sell them from the next day onwards, that's fine. The HMRC Capital Gains Manual is pretty clear on the matter, even though they cunningly avoid giving an example that would clarify it for this scenario, but you only get a same-day match for sale/purchase on the same day, and you only get a 30-day match where the purchase comes after the sale. If a sale comes after a purchase, it's no match, as long as you don't buy any more again within 30 days of the sale