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Legal Terms - Bed and Breakfasting
The process of selling shares on one day and then buying them back on the next day. Traditionally, this action has been carried out to initiate a loss that can be offset against gains that would otherwise be liable to capital gains tax. Section 106A of the Taxation of Chargeable Gains Act 1992 renders the agreement invalid for shares that are both sold and repurchased within a 30-day timeframe. Nevertheless, there are no regulations that prohibit the practice of bed and breakfasting with regards to other assets, such as works of art. In Davies v Hicks [2005] EWHC 847, the taxpayer employed a creative strategy to evade a tax liability of £1,676,000 on the sale of a property. This was achieved by transferring a trust from UK trustees to trustees in Mauritius, taking advantage of the bed and breakfast anti-avoidance rules.
The process of selling shares on one day and then buying them back on the next day. Traditionally, this action has been carried out to initiate a loss that can be offset against gains that would otherwise be liable to capital gains tax. Section 106A of the Taxation of Chargeable Gains Act 1992 renders the agreement invalid for shares that are both sold and repurchased within a 30-day timeframe. Nevertheless, there are no regulations that prohibit the practice of bed and breakfasting with regards to other assets, such as works of art. In Davies v Hicks [2005] EWHC 847, the taxpayer employed a creative strategy to evade a tax liability of £1,676,000 on the sale of a property. This was achieved by transferring a trust from UK trustees to trustees in Mauritius, taking advantage of the bed and breakfast anti-avoidance rules.
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