GrahamPlatt wrote:This 30 day rule is intended to stop people using their CGT allowance by selling and then rebuying the same share in quick succession. But is it considered as if the transaction did not happen? I ask because there are situations where that might be advantageous - e.g. correcting the effect of accepting a company’s offer to repurchase, which takes you over your CGT limit, then rebuying after the event (as with e.g. NWBD recently).
No, it is
not treated as though the transaction did not happen.
If the repurchase is of exactly the same number of shares as were sold, it is instead treated as though the sale sold the repurchased shares. (Never mind the fact that you didn't own those shares at the time you sold and so
couldn't have sold them - it's still treated that way.) So the sale and the repurchase realise a likely-to-be-small gain or loss and all other outstanding transactions (including in particular the original purchase(s) of the sold shares) remain on the record to have gains and losses calculated from them in the future.
If the repurchase is of more shares than were sold, apportion the repurchase into a 'genuine repurchase' of the same number of shares as were sold and an 'extra purchase' of however many more were bought. Treat the sale as selling the shares bought by the 'genuine repurchase', then deal with the 'extra purchase' in the normal way for a purchase.
If the repurchase is of fewer shares than were sold, apportion the sale into a '30-day sale' of the same number of shares as were repurchased and an 'extra sale' of the rest of the shares that were sold. Treat the '30-day sale' as selling the repurchased shares, then deal with the 'extra sale' in the normal way for a sale.
There are indeed cases where it's advantageous that the 30-day rule applies. For example, a share on which you have a large unrealised gain receives a takeover bid and its share price rises a lot more. You reckon the bid will go through and so sell, realising a huge gain - you'd prefer not to realise that big a gain all at once, but it looks inevitable... Then the takeover bid unexpectedly falls through a week or two later, the share price falls, and you can now repurchase the shares to end up having realised a more modest gain on the sale and repurchase, and owning your original holding with its large unrealised gain. Without the 30-day rule, you'd have been stuck with the huge gain...
More generally, the 30-day rule can reasonably often be used to
mostly cancel out the CGT effects of a sale when it has quickly emerged that that sale was a mistake. But it's not the total cancelling-out that would result from treating the transaction as not having happened - instead, it's a case of causing the gain or loss on the transaction to be calculated on the basis of up to 30 days of share price movements, rather than on the basis of many months, years or even decades of share price movements.
Gengulphus