CGT – End to B&B share dealing

The Inland Revenue has decided not to close loopholes which will allow investors to continue ‘bed-and-breakfasting’ shares, despite the Budget’s clampdown on the practice, writes Andreina Cordani.

This spring’s finance bill will include measures against bed-and-breakfasting, in which investors avoid a heavy capital gains tax bill by selling shares and buying them back the next day. But the Revenue has confirmed the bill will not rule out ‘bed-and-PEPing’ in which shares are sold by an investor and bought back inside a PEP and so remain CGT-free.

Other ways of getting around the legislation, including getting the investor’s spouse to buy back the shares the next day, or creating a trust in the investor’s name and gifting the shares to the trust, are expected to remain in place.

A Revenue spokesman said: ‘Bed-and-PEPing will continue. But the chancellor has made clear his feeling on the subject of bed-and-breakfasting, and ministers will keep an eye on developments and take action if necessary.’

David Norman, senior manager at KPMG, said: ‘Fewer people will be aware of these loopholes than were involved in bed-and-breakfasting, and the cost of going through them will be higher.’

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