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.

Source:HM Revenue & Customs | 15-01-2024