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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15975
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am facing a large cgt bill /16 so i plan on

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i am facing a large cgt bill for 2015/16 so i plan on selling some shares which are sitting on a loss to mitigate the gain
however i wish to retain the shares in question for recovery purposes so my plan was to 'bed and isa', thus crystallising the loss and putting the shares into a cgt free wrapper
i have used up my isa subscription for 2015/16 and in any event the sums involved are quite large so i plan to sell some other shares in the isa to fund the buyback of the loss makers
my broker says that the only way to do this is via a 'put through' whereby the sale and repurchase are done via a market maker for minimal spread (that's good news)
however they also say that the transaction would not be classified as a 'bed and isa' because 'no funds will be added to the receiving account' (the repurchase being funded by the prior sale of other shares within the isa)
So the end result is the same as with 'bed and isa', it's just that i already have the repurchase availability within the isa due to the prior sale of other shares
my question is does the proposed transaction still comply with the exclusion from the cgt share matching rules on the basis that the vendor (me) and purchaser (isa) are separate legal entities or does the 'put through' and/or no cash subscription aspect render it non-compliant?
thanks in advance
Hi. Let me take a look at this and I'll get back to you in a bit.
Customer: replied 1 year ago.
no great rush-take as long as you like as i need to get this right (well no later than tuesday!)
Hi. All transactions within an ISA are completely tax free and separate from your non-ISA funds so even if you don't use the actual sale proceeds from the sale which crystallises the loss to be used against your 2015/16 gains and instead buy back the shares using cash already in your ISA, you will not be treated as having breached the same day or 30 day rules which apply to share transactions outside the protection of an ISA. Therefore, the loss will be available to use to reduce your 2015/16 gains. Think of it like this. There is no obligation on you to buy back the shares so why should you be penalised by buying them back using funds already in an ISA? You want to buy them back because you think they will recover in price. If you don't buy back the shares, you have a usable capital loss. If you buy back the shares in your ISA, you will not breach the same day or 30 day rules as the ISA is a tax free wrapper and whatever happens in there has no effect on your CGT position outside the ISA. The ISA providers use the term "Bed and ISA" to promote the idea of realising a gain or a loss outside an ISA to utilise the annual CGT exemption or to reduce taxable gains and to buy back the shares in an ISA if the investor thinks the price will go higher or recover. I hope this helps but let me know if you have any further questions.
Customer: replied 1 year ago.
thanks for that
i think the 'put through' aspect has confused me because i will benefit from negligible spread on the sale and repurchase
also my brokers keep making the distinction between the buyback being funded via funds added to the isa via the sale outside ('normal' bed and isa) and my intention to sell shares in the isa to fund the buyback ie no new funds introduced
i think what you're saying is that as long as the sale is done outside the isa and the buyback done within the isa then the usual share matching rules do not apply ie the actual mechanics are irrelevant?
The sale will obviously take place outside the ISA to create the usable capital loss. The repurchase has to take place within the ISA but you don't have to use the disposal proceeds to fund the repurchase. As I said in my previous post, the term "bed and ISA" is industry hype. If you can get a good deal on the transaction costs, all the better.
Customer: replied 1 year ago.
so it really does boil down to the 'separate legal entity' aspect between me as vendor and my isa as purchaser-just like with 'bed and spouse' ie hmrc can't share match across the two separate legal entities?
No, they cannot. It's possible to already own shares in company "X" both outside and inside an ISA but the transactions in those shares will never be matched whilst they are separated by the tax free wrapper.
Customer: replied 1 year ago.
that's very useful advice-thanks a lot for your help
Thanks. Would you mind rating my answer before you leave the site please.
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Customer: replied 1 year ago.
of course-done-5/5