Share matching rules

A summary of the share matching rules and how they eliminated the “bed and breakfast” CGT planning advantage

April 2021

PART OF 35 MINS STRUCTURED CPD

20 MIN READ

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Risk Disclaimer

This content is directed only to persons having professional experience in matters relating to personal investment (investment professionals) and should not be distributed to anybody else. It has been prepared for general information purposes only. It does not constitute advice (whether investment, legal, regulatory, tax or otherwise) provided by BMO Global Asset Management (EMEA) (BMO). Certain content in this document is based on our own reading of legislation, regulation, or guidance issued by a government or regulatory authority, as at the date of publication, which is subject to ongoing change. Tax treatment is based upon individual circumstances. BMO gives no warranty or representation, whether express or implied, that such content is up to date, complete, or accurate.

Investment professionals in receipt of this document should not rely on any of its content. They remain solely responsible for advising their underlying clients in accordance with their own legal and/or regulatory obligations and for taking their own independent advice as they determine is necessary.

To the extent lawful, BMO excludes all responsibility and associated liability for any loss or damage suffered by any recipient of this document who chooses to rely on its content, whether occurring in contract, tort (including negligence), breach of statutory duty, or otherwise, even if foreseeable.

Key takeaways:

  • Learn how the share matching rules are applied
  • Understand how capital gains tax relates to the disposal of shares or funds
  • Understand the planning implications of the share matching rules

A summary of the share matching rules and how they eliminated the “bed and breakfast” CGT planning advantage

Attempting to balance risk and return is an age-old dilemma, but it is generally accepted that a degree of investment risk is required to gain returns in excess of the ‘risk-free’ returns available from cash deposits.

Investment risk can lead to a complete loss of capital, but often risk is the way we refer to volatility. In other words, the fluctuations in investment performance over time, resulting in positive and negative price movements.

While volatility can be unsettling, it does provide opportunity for planning and positive engagement with clients at difficult times.

 

Bed and breakfasting

One of the ways that investors used to attempt to manage the tax liability of their investments was ‘bed and breakfasting’. It is a strategy of selling shares or funds when the price had risen, followed by immediately re-investing the gains into the same shares or funds, so as to realise a capital gain within the available capital gains tax (CGT) allowance, without incurring market timing risk (the risk of the price going up while you are disinvested). This strategy could also be used to crystallise losses.

This would allow investors to effectively lower the eventual tax liability that would arise when they decided to sell the shares or funds to realise their returns.

It is, of course, still possible to do this, but the CGT advantage is mitigated by share matching rules.

Download our explanation of share matching rules and the reasons why it has made planning more challenging, along with some case study scenarios.

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Risk Disclaimer

This content is directed only to persons having professional experience in matters relating to personal investment (investment professionals) and should not be distributed to anybody else. It has been prepared for general information purposes only. It does not constitute advice (whether investment, legal, regulatory, tax or otherwise) provided by BMO Global Asset Management (EMEA) (BMO). Certain content in this document is based on our own reading of legislation, regulation, or guidance issued by a government or regulatory authority, as at the date of publication, which is subject to ongoing change. Tax treatment is based upon individual circumstances. BMO gives no warranty or representation, whether express or implied, that such content is up to date, complete, or accurate.

Investment professionals in receipt of this document should not rely on any of its content. They remain solely responsible for advising their underlying clients in accordance with their own legal and/or regulatory obligations and for taking their own independent advice as they determine is necessary.

To the extent lawful, BMO excludes all responsibility and associated liability for any loss or damage suffered by any recipient of this document who chooses to rely on its content, whether occurring in contract, tort (including negligence), breach of statutory duty, or otherwise, even if foreseeable.

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