CG13370 - Bed and breakfasting: shares and securities


The bed and breakfast deal you are most likely to see in practice is the sale and repurchase of shares. The share identification rules mean that the disposal and repurchase must not take place on the same day. This is because TCGA92/S105 (1)(b) matches disposals first against acquisitions made on the same day, including acquisitions made after the disposal(1)(b), see CG50820+. So even if there was a disposal, a reacquisition of the shares on the same day would not give rise to any significant gain or loss.

Where a disposal of shares on or after 17 March 1998 by a taxpayer within the charge to Capital Gains Tax is followed within 30 days by an acquisition of shares of the same class, see CG50566.

In the case of quoted shares there may well be an understanding between the shareholder and his or her broker that the shares sold will be repurchased the next day. However, such an understanding does not amount to an enforceable contract to repurchase the shares. To argue that there was no disposal, you would have to show that an unconditional agreement to reacquire the shares was made at the time of the sale, see CG13360.

Shareholders can minimise the risk of movements in the share price between the disposal and repurchase by selling the shares as late as possible on one day, and repurchasing them early the next morning. The repurchase price may be only slightly different from the sale price. This merely reflects the low risk of movements in the share price overnight in these cases, and does not in itself establish that there has been no disposal, see CG13360.