Circumventing the 30 day rule on share buyback

[forgotusername]

My OH and I each have a share account. It's not an ISA so stocks are subject to CGT. If my OH transfers (gifts) one of the stocks to me and I sell it to use my CGT allowance, can my OH immediately buy the same stock without triggering the 30 day rule. I'm hoping that since the original holding now belongs to me, that the gift would not be classed as a sale by my OH.

[forgotusername]

Just to amplify this point, I think the original holding will have been sold and the CGT reported by me so my OH can buy the stock afresh and rebase the cost for CGT purposes. It makes sense to me but is anyone able to confirm the logic is correct?

[88V8]

If my OH transfers (gifts) one of the stocks to me ...

Hmmm
Well it says here that you can under 4.
Another method, if you own the shares solely, is to sell them in the market (creating the gain). Your spouse can then simultaneously repurchase them in the market to avoid any price movement. Your spouse then transfers the shares back to you (if that’s desirable), in effect at their repurchase price.
In this instance, neither of you makes a chargeable gain or loss.
but I don't understand the example, nor in a nominee account can I see the method.

It seems too good to be true.

V8

[Lootman]

"Another method, if you own the shares solely, is to sell them in the market (creating the gain). Your spouse can then simultaneously repurchase them in the market to avoid any price movement. Your spouse then transfers the shares back to you (if that’s desirable), in effect at their repurchase price.

In this instance, neither of you makes a chargeable gain or loss."

It seems too good to be true.

I don't see why it would not work. The loophole is based on the fact that we have separate taxation of spouses. And yet there are special exemptions given to spouses in terms of transfers between them not being considered to be tax events. So there are arbitrage opportunities.

There are other tactics like that which can be profitably used in end-of-life situations. The spouse who is expected to survive transfers all positions showing an unrealised gain to the dying spouse. Whilst the dying spouse transfers all positions with an unrealised loss to the surviving spouse. Saves a lot of future CGT due to the uprating of cost basis upon death under current rules.

[DrFfybes]

The logic appears to be correct. A share transfer between spouses is not currently considered a disposal for creating a taxable capital gain. However it might be considered a disposal for the 30 day rule. In which case you just wait 30 days between trasfer and sale/repurchase.

As V8 says, your spouse can sell and realise a gain, give the cash to you, and then you buy them. That is fine, and if you want then you can then give them to your spouse, who acquires them at your purchase cost, although I'd wait 31 days to make the transfer, just in case

If my OH transfers (gifts) one of the stocks to me and I sell it to use my CGT allowance, can my OH immediately buy the same stock without triggering the 30 day rule. I'm hoping that since the original holding now belongs to me, that the gift would not be classed as a sale by my OH.

You seem to want to do the opposite of the example, and again it looks fine. Your spouse has no CGT allowance left, they can gift shares to you, and you acquire them at the cost the spouse purchased them at. Then, 31 days later to be on the safe side, you sell to realise a gain, using your allowance. You gift the cash to your spouse, who repurchases them outside of the 30 days since disposal.
Paul

[88V8]

...if you want then you can then give them to your spouse..

How would one do that in nominee accounts?

V8

[genou]

...if you want then you can then give them to your spouse..

How would one do that in nominee accounts?

V8

SpouseA sends an email ( this is useful since it is irrevocably dated ) to SpouseB stating that they gift <whatever> to them, and now hold them on their instruction. SpouseB then sends an email to SpouseA mandating a sale.

I don't think gifts between spouses are outwith the 30 day rule. The first gift will be no gain/ no loss and that transaction will enter into the 30 day calculation.

[Lootman]

I don't think gifts between spouses are outwith the 30 day rule. The first gift will be no gain/ no loss and that transaction will enter into the 30 day calculation.

It is not clear to me what you are saying there.

Are you saying that this tactic will work or that it will not? If not, why not?

[DrFfybes]

...if you want then you can then give them to your spouse..

How would one do that in nominee accounts?

V8

If you are both with the same platform you send them a secure message to gift them to the other person.

Well at least you can with II or HL.

Paul

[forgotusername]

Thanks all for responses. To be clear, I have a substantial CGT loss that I would like to use up. My spouse does not but holds a stock with a CGT gain which far exceeds the CGT tax fee allowance. Both of us are with the same provider HL who are happy to transfer stock between spouses. Doing so would require me to move the original transaction cost from my spouse's CGT records (an Excel spreadsheet) to my CGT records as if I had made the original purchase. I would then sell the shares and on my next tax return declare the purchase and sale to establish my CGT liability. Happily, in the same tax year I would report a loss on another stock wiping out the gain just created.

My spouse having no longer having any record of owning this stock for CGT purposes would be able to buy again to establish a new base cost without waiting 30 days.

HMRC would see my notional CGT gain so there's no failure to report it. I would simply offset a gain with a loss.

[DrFfybes]

My spouse having no longer having any record of owning this stock for CGT purposes would be able to buy again to establish a new base cost without waiting 30 days.

HMRC would see my notional CGT gain so there's no failure to report it. I would simply offset a gain with a loss.

I'd do the transfer and then wait 30 days before you sell and your wife buys back, so it is 30 days in between her disposing of the shares and buying them again. Although in the real world I doubt it would be an issue.

Paul

[genou]

I don't think gifts between spouses are outwith the 30 day rule. The first gift will be no gain/ no loss and that transaction will enter into the 30 day calculation.

It is not clear to me what you are saying there.

Are you saying that this tactic will work or that it will not? If not, why not?

Original shares bought by wife 100. Transferred at real value 1000, but the transfer is to a spouse, so deemed disposal value 100.

Wife then buys, within 30 days, same number of shares for 1000. So we need to match that purchase to the gift to the husband, giving us cost 1000, proceeds 100 and the wife generates a CGT loss of 900. At the same time her deemed acquisition cost of the new shares will be 100, so they are carrying a CGT gain of 900 immediately, so the transaction is a net nothing for the wife.

The husband will have a cost of 100, proceeds 1000, generating a CGT gain of 900.

[DrFfybes]

Original shares bought by wife 100. Transferred at real value 1000, but the transfer is to a spouse, so deemed disposal value 100.

Wife then buys, within 30 days, same number of shares for 1000.

As I said above (twice ) there is no reason to do the sell and buy immediately after the transfer to the spouse. You just do the transfer then wait 30 or more days to do the sell and buyback. As long as it is done before the end of March then the CGT allowance isn't lost.

Paul

[genou]

Original shares bought by wife 100. Transferred at real value 1000, but the transfer is to a spouse, so deemed disposal value 100.

Wife then buys, within 30 days, same number of shares for 1000.

As I said above (twice ) there is no reason to do the sell and buy immediately after the transfer to the spouse. You just do the transfer then wait 30 or more days to do the sell and buyback. As long as it is done before the end of March then the CGT allowance isn't lost.

Paul

Indeed, I was just responding on the point that an inter spouse transfer doesn't make the 30 day rule go away.

[Lootman]

Original shares bought by wife 100. Transferred at real value 1000, but the transfer is to a spouse, so deemed disposal value 100.

Wife then buys, within 30 days, same number of shares for 1000.

As I said above (twice ) there is no reason to do the sell and buy immediately after the transfer to the spouse. You just do the transfer then wait 30 or more days to do the sell and buyback. As long as it is done before the end of March then the CGT allowance isn't lost.

Sure and the primary goal here is to reduce the total CGT liability for the couple, and that is achieved either way.

Where genou and I differ is that he thinks the transfer to the husband is still a tax event even though it does not need to be reported/declared and no tax is due on that transfer. Whereas I am claiming that the transfer is not a tax event and so has no bearing on the matter.

The husband reports an acquisition and a sale. The wife reports nothing. That's it - nothing connects the two if the transfer is not a tax event. And the CGT still arises for the husband, and CGT must be paid if over the allowance.

[DrFfybes]

As I said above (twice ) there is no reason to do the sell and buy immediately after the transfer to the spouse. You just do the transfer then wait 30 or more days to do the sell and buyback. As long as it is done before the end of March then the CGT allowance isn't lost.

Sure and the primary goal here is to reduce the total CGT liability for the couple, and that is achieved either way.

Where genou and I differ is that he thinks the transfer to the husband is still a tax event even though it does not need to be reported/declared and no tax is due on that transfer. Whereas I am claiming that the transfer is not a tax event and so has no bearing on the matter.

The husband reports an acquisition and a sale. The wife reports nothing. That's it - nothing connects the two if the transfer is not a tax event. And the CGT still arises for the husband, and CGT must be paid if over the allowance.

I think Genou is sayng that the gift is a disposal, and if the repurchase is within 30 days then the gift BECOMES a tax event.

Paul

[Lootman]

Sure and the primary goal here is to reduce the total CGT liability for the couple, and that is achieved either way.

Where genou and I differ is that he thinks the transfer to the husband is still a tax event even though it does not need to be reported/declared and no tax is due on that transfer. Whereas I am claiming that the transfer is not a tax event and so has no bearing on the matter.

The husband reports an acquisition and a sale. The wife reports nothing. That's it - nothing connects the two if the transfer is not a tax event. And the CGT still arises for the husband, and CGT must be paid if over the allowance.

I think Genou is saying that the gift is a disposal, and if the repurchase is within 30 days then the gift BECOMES a tax event.

Yes, Genou is saying that. But in general gifts do not need to be reported at the time they are made. And in fact a gift may never be reported except for IHT purposes if the donor dies within 7 years. But that is not the topic here and IHT isn't due on amounts that a spouse inherits anyway.

Now, a gift to a non-spouse is considered as a sale at market value, and CGT is due, so that does need to be reported. But there is an exception to that where the gift is between spouses. No tax is due in that case, so why would anyone think to report that?

I am not certain of course. I just think it is a reasonable argument that someone could make. Like you I might play it safe as well, since I am generally not bothered about being out of a position for 30 days.

[forgotusername]

Transfer of stock to me has been requested. Will wait 31 days so spouse can repurchase and I can sell. Thx all.

[DrFfybes]

Now, a gift to a non-spouse is considered as a sale at market value, and CGT is due, so that does need to be reported. But there is an exception to that where the gift is between spouses. No tax is due in that case, so why would anyone think to report that?

I am not certain of course. I just think it is a reasonable argument that someone could make. Like you I might play it safe as well, since I am generally not bothered about being out of a position for 30 days.

Agreed a transfer to a spoouuse is not a tax event but it is a disposal, and as such could come under the 30 day rule.
Waiting 30 days from transfer completion until sale by recipient and repurchase by the donor means you're not out of the market at all. Of course you need the funds available to do both simultaneously, or a quick transfer between the 2

[genou]

It is from its very occurrence a tax event. It is a disposal, just one that is treated oddly. See s58 TCGA92 ( as amended) .

58[Spouses and civil partners].
(1)If, in any year of assessment, —
(a)an individual is living with his spouse or civil partner, and
(b)one of them disposes of an asset to the other, both shall be treated as if the asset was acquired from the one making the disposal for a consideration of such amount as would secure that on the disposal neither a gain nor a loss would accrue to the one making the disposal.


And from s1 TCGA92 ( as amended ) , with emphasis added:

1Capital gains tax
(1)Capital gains tax is charged for a tax year on chargeable gains accruing in the year to a person on the disposal of assets.

Initially, it does not need reported, but once the 30 day event occurs, it requires reported as part of the reporting of the second transaction if that second transaction gives rise to gains or disposal values that require a CGT return to be made ( which may well be never ). I'm labouring the point here, but the inter-spouse element just does not affect the 30 day rule. And of course, it alters the numbers on any subsequent disposal of the "new" shares.

I'm sure the OP has got the better solution to the situation.