Bed and breakfast vanguard funds
Discussion
I'm confused about the rules around buying/selling funds and mitigating capital gains through bed and breakfast.
There is the 30-day rule. Is this measured against the fund or the underlying assets?
I.e. if I were to sell LifeStrategy 80 and immediately put half the proceeds into LifeStrategy 60, and the other half into LifeStrategy 100. Anyone know if that is within the rules even though I'd essentially own exactly the same thing?
There is the 30-day rule. Is this measured against the fund or the underlying assets?
I.e. if I were to sell LifeStrategy 80 and immediately put half the proceeds into LifeStrategy 60, and the other half into LifeStrategy 100. Anyone know if that is within the rules even though I'd essentially own exactly the same thing?
ILikeCake said:
I.e. if I were to sell LifeStrategy 80 and immediately put half the proceeds into LifeStrategy 60, and the other half into LifeStrategy 100. Anyone know if that is within the rules even though I'd essentially own exactly the same thing?
Nice idea but I'll bet any sale of a fund is a chargeable event unless in an ISA.ILikeCake said:
I'm confused about the rules around buying/selling funds and mitigating capital gains through bed and breakfast.
There is the 30-day rule. Is this measured against the fund or the underlying assets?
I.e. if I were to sell LifeStrategy 80 and immediately put half the proceeds into LifeStrategy 60, and the other half into LifeStrategy 100. Anyone know if that is within the rules even though I'd essentially own exactly the same thing?
As it was explained to me you can do that; what you can't do is buy the same fund (or share) for 30 days. Of course the sale & purchase will be a CGT triggering event but presumably you're making sure the gain is less than your annual allowance.There is the 30-day rule. Is this measured against the fund or the underlying assets?
I.e. if I were to sell LifeStrategy 80 and immediately put half the proceeds into LifeStrategy 60, and the other half into LifeStrategy 100. Anyone know if that is within the rules even though I'd essentially own exactly the same thing?
CaptainHindsight said:
But Lifestratrgy 60, 80, 100 are not 'the same thing', they are completely different funds with different risk blends? Similar yes, the same no.
The LifeStrategy funds are made up of the same underlying funds, just in different proportions to reflect risk. So in theory a 50/50 split of LS60 and LS100 would be almost identical to all the funds in LS80.That's what I'm not sure about in regards to B&B, the fund name might change but if be opening almost exactly the same 'stuff'.
Mr Pointy said:
As it was explained to me you can do that; what you can't do is buy the same fund (or share) for 30 days. Of course the sale & purchase will be a CGT triggering event but presumably you're making sure the gain is less than your annual allowance.
Yep that's the plan! It's not a massive amount bit likely be 10+ years until I touch it, so good to mitigate CGT now.Have a look here:
https://www.gov.uk/government/publications/shares-...
"A switch from units in one sub-fund to units in another will normally be a disposal of the old units, on which capital gain or loss will arise. "
So it looks like the rules aren't sophisticated enough to take account of transactions that are undertaken purely to avoid tax.
https://www.gov.uk/government/publications/shares-...
"A switch from units in one sub-fund to units in another will normally be a disposal of the old units, on which capital gain or loss will arise. "
So it looks like the rules aren't sophisticated enough to take account of transactions that are undertaken purely to avoid tax.
LeoSayer said:
transactions that are undertaken purely to avoid tax.
Transactions undertaken to ensure official allowances are used appropriately sounds less devious somehow.The OP presumably has too much to be able to simply move the funds into their ISA when the new allowance is available and deal with the problem that way?
That was my plan for last year, sell from the taxed account on the 5th and rebuy in the ISA on the 6th, but volatility was so high I couldn't stomach it.
Edited by xeny on Friday 12th February 10:15
Royal Jelly said:
Simpo Two said:
Nice idea but I'll bet any sale of a fund is a chargeable event unless in an ISA.
He’s referring to bed & breakfasting - which is the term used to realise your annual CGT allowance and buying back in. Interested out of sheer curiosity, too.
I came this way a few years ago and the answer was no. You're selling a fund which is its own entity.
LeoSayer said:
Have a look here:
https://www.gov.uk/government/publications/shares-...
"A switch from units in one sub-fund to units in another will normally be a disposal of the old units, on which capital gain or loss will arise. "
So it looks like the rules aren't sophisticated enough to take account of transactions that are undertaken purely to avoid tax.
The rule has to straightforward otherwise it would be impossible to define if the old & new investment was the same thing or not. The 30 rule was brought in to prevent investors selling an investment one day & buying back exactly the same thing the next, so that's what is prohibited. You could sell Shell A shares one & day & buy Shell B shares the next & it would be allowable as they are a different class.https://www.gov.uk/government/publications/shares-...
"A switch from units in one sub-fund to units in another will normally be a disposal of the old units, on which capital gain or loss will arise. "
So it looks like the rules aren't sophisticated enough to take account of transactions that are undertaken purely to avoid tax.
Lifestrategy 100 is not the same as Lifestrategy 80 so the CGT "crystalisation" the OP is looking at is an acceptable plan. I'm looking at doing the same with IM funds some time in early March.
Mr Pointy said:
The rule has to straightforward otherwise it would be impossible to define if the old & new investment was the same thing or not. The 30 rule was brought in to prevent investors selling an investment one day & buying back exactly the same thing the next, so that's what is prohibited. You could sell Shell A shares one & day & buy Shell B shares the next & it would be allowable as they are a different class.
Lifestrategy 100 is not the same as Lifestrategy 80 so the CGT "crystalisation" the OP is looking at is an acceptable plan. I'm looking at doing the same with IM funds some time in early March.
Great, thanks for the link and info. If the hmrc come knocking I'll point them to this thread. Lifestrategy 100 is not the same as Lifestrategy 80 so the CGT "crystalisation" the OP is looking at is an acceptable plan. I'm looking at doing the same with IM funds some time in early March.
Simpo Two said:
I was going by 'if I were to sell LifeStrategy 80 and immediately put half the proceeds into...' Immediately isn't B&B
I came this way a few years ago and the answer was no. You're selling a fund which is its own entity.
Semantics aside, he was quite clearly asking how to effectively B&B his VLS. Glad to hear that recreating VLS80 with 100/60 is acceptable. I came this way a few years ago and the answer was no. You're selling a fund which is its own entity.
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