Bed and Breakfasting
Measures have been introduced to counter tax avoidance schemes which exploit the bed and breakfasting rules in certain circumstances to ensure that no CGT is payable on substantial gains.

The bed and breakfasting rules set out in TCGA 1992, s 106A are part of the identification rules which apply on the disposal of securities and are designed to prevent those within the charge to CGT disposing of securities and acquiring identical ones shortly afterwards for the purpose of realising a tax-free capital gain or a capital loss while still, in effect, holding on to the investment.

The amendment prevents the rules applying in relation to acquisitions made at times when the person making the disposal:

• is neither resident nor ordinarily resident in the UK; or
• is resident or ordinarily resident in the UK, but is ‘treaty non-resident’, i.e. is regarded as resident in a territory which is outside the UK for tax treaty purposes.

Where the amendment has effect, the gain or loss on the disposal will be calculated on the basis that the securities disposed of were acquired before the disposal, rather than being those acquired within 30 days of the disposal.

The change will apply in relation to acquisitions made on or after 22 March 2006, irrespective of when the disposal was made.