LAM03710 | Calculation of ‘I’ Income and chargeable gains: Transactions in shares: Bed and breakfasting: TCGA92/210B

General

Chargeable gains ‘bed and breakfasting’ (B and B) anti-avoidance rules aim to limit the ability of investors to artificially create losses by selling and immediately or almost immediately, buying them back.

The B and B rules are explained at CG51615 and are adapted in TCGA92/S210B to cater for the way box transfers and share pooling work for life companies. In particular, a disposal for this purpose includes FA12/S116 box transfers LAM03210.

Without this adaptation, life companies could artificially generate BLAGAB allowable losses by transferring assets between chargeable gain boxes within the life company.

Operation of the B and B rules

TCGA92/S210B(2-4) apply when:

• there is a disposal of securities that are a chargeable TCGA92/S119 or TCGA92/S120 holding

• there is an acquisition of securities within any 10 day period including the disposal date that increases the same holding

• absent this section an allowable loss would arise on the disposal

• the disposal and acquisition are not on the same day (if they are on the same day TCGA92/S105 applies)

• the security is not an asset withinTCGA92/S212(1) LAM03310

• the securities disposed of and acquired are not wholly matched to BLAGAB

In this case the acquisitions and disposals in the 10 day period are matched. In practice this can be 18 days – the nine days before and after the disposal. In order to determine if an allowable loss would be made the operation of these rules are aligned with B and B rules for other chargeable gains - set out with an example in CG51615.

Identification and ordering rules TCGA92/S210B

If S210B(1) applies, then S210B(2) requires the shares disposed of to be identified in a slightly different way from the standard B and B rules. The ordering rule for identification in the 10 day period before and after the disposal is (S210B(3)-(4):

• first identify the disposal with acquisitions on the same day. TCGAS105(1) applies to these disposals S210B(5);

• then identify securities acquired before the disposal; and for these identify securities acquired later than those acquired earlier (LIFO basis);

• then identify securities acquired after the disposal; and, for these identify securities acquired earlier than those acquired later (FIFO basis).

Where there is more than one disposal, acquisitions will be identified in a similar way, with disposals at an earlier date in preference to disposals at a later date.

The differences from the standard B and B rules in TCGA92/S107 are:

a) if the nine days before the disposal contain a relevant acquisition, TCGA92/210B identifies the disposal with a later acquisition before an earlier, while S107 does the opposite.

b) after identifying the disposal with the acquisitions in the previous nine days, the normal rules would proceed immediately to the pools. But S210B requires the examination of acquisitions in the nine days following the disposal.

Other differences: Exceptions

Specific exceptions from the B and B rules exclude the following:

• collective investment scheme holdings within TCGA92/S212(1), whether a deemed disposal or an actual disposal S210B(6)(a).

• assets wholly matched to BLAGAB liabilities where the assets are appropriated to a BLAGAB internal linked fund, and are disposed of and reacquired in order to match liabilities of that or another such fund S210B(7).

These are cases where a company may have little or no choice about the disposal, or where it is unlikely that significant losses could be generated.