At some point before the end of the current tax year I'd like to realise my partners and my gains in some unit trusts which will be within the annual CGT limits. In an ideal world I'd then like to reinvest in the same unit trust - which I understand I cannot do if I wish to avoid paying the cgt in future years on this years gain. I understand though that I can reinvest in a different vehicle.
Can anyone tell me - or point me to an explanation of guidelines for this process so that I can see what precisely can and cannot be done?
Basically, if you sell a given share or unit and buy the *same* share or unit back within 30 days the matching to work out the gain is done in reverse. For example, if you bought a share for 100p, sell it for 200 and buy it back 10 days later for 210 you would realise a *loss* of 10p (210-200) and not a gain of 100. That only applies if what you buy is exactly the same share/unit, and not if you buy back in an ISA.
It also doesn't apply if your partner buys it back instead. When you say partner I assume you aren't married, which affects things a bit; spouses can transfer assets between them without triggering CGT, but unmarried partners can't. Since you're trying to realise a gain that might actually be an advantage, you and your partner could exchange holdings and crystallise a gain. However, you would probably have to prove that a real transfer took place at a market price.
Also watch out for dealing costs, depending on circumstances it may not be worth it.
ObDisclaimer: This is just my understanding of the rules, check the inland revenue web site for the real answers.
In message of Wed, 7 Jan 2004, Terry Harper writes
He is correct, and so are you to some extent. If you sell shares, they have to be matched with a purchase. And the order is:
1) Shares purchased on the same day
2) Shares purchased within 30 days, in date order
3) Shares purchased since 5/4/98 on a LIFO basis
4) 5/4/98 Pool
5) 1982 holding
6) Shares purchased pre 6/4/65
So his example is correct - there would be a loss of 10p. And the cost of the remaining shares would be 100p.
That's true, but doesn't affect what I said. The point is that the sale still counts as a chargeable event, but the gain/loss is calculated matching in reverse. If/when you subsequently sell, the gain/loss will indeed still be calculated using a 100p base cost.
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here.
All logos and trade names are the property of their respective owners.