Hello,
I am in the fortunate position that I have just incurred a ~£77k CGT bill on an investment. Had planned to cash out and buy a house in France, but various articles including the following link are dissuading me! https://www.accountingweb.co.uk/tax/personal-tax/brace-for-brexit-20-tax...
I have until April to offset my gain against any losses, (un?)fortunately I do not have any losses so far. I also have a healthy, profitable spreadbetting account, which as it is classed as gambling and is not my primary source of income is not subject to CGT on gains - circa £40k so far this year.
I plan to buy a risky, speculative share that is either going to 10x or be worth almost nothing (e.g. AMC entertainment) before April. If it did fall I would try and size it so that it would be near to a £77k. loss I was planning to put a counter spreadbed short on the same share through my spreadbetting account (which would not be taxable) so that the fall in the share would be offset by a spreadbetting profit - many people including myself use spreadbetting to hedge their stocks and prevent CGT chargeable events.
Clearly there are risks here, in that should the shares I buy rise, then I would lose all of the balance on the spreadbetting size and this would not help my CGT position, but should I be right, and it fall, I could sell pre-April and offset this loss against my gain and then keep the profit on the spreadbetting side.
Clearly there are several factors here, e.g. cost of funding a short position over a 3 month period, finding a stock that will fall by £77k etc etc but I wondered whether the HMRC would like deal it efficient tax planning or tax evasion. I would find it hard to argue the latter since it is by no means guaranteed, and is all perfectly within the law, and there is a risk of generating even more CGT for the govt - of course if the share were profitable I would not have to sell immediately and could then spread it out over years...
Interested to hear peoples thoughts on the matter!
Replies (17)
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Is the tax due in circa 30 days or on 31 Jan 2022? If the former, I think you need to pay it (notwithstanding that it may later be recoverable); either way, I'm not seeing tax evasion. Mind you, I'm not seeing what I would call tax planning either, so maybe the issue is with me.
I'm not allowed to give financial advice in a professional context. However, there's no requirement to bring professional... standards? restrictions? to this forum (as you may have spotted). So I'll add: you say "if the share were profitable I would not have to sell immediately and could then spread it out over years", but you of course would have to fund your matching bet. If you kept the bet in place, this would cost far in excess of the tax (the tax you didn't save and the extra tax you would be incurring on no overall profit). If the share price bumped, you shed the bet but not the shares and then the share price slumped, you'd be losing every which way. That's a gamble.
A person is able to organise their tax affairs to minimise the tax payable. I don’t see how this could be (successfully) challenged since you are bearing risk.
(This is just my personal view, if you are concerned then get written advice from a tax advisor.)
Let me get this straight:
- you want to offset a chunky tax bill by betting on something that *might* have an upside?
Given that to offset the tax you would have to lose almost your entire gain. Not sure I see the point - or have I misunderstood something?
I might have misunderstood, but isn’t the OP saying that if there was a CGT taxable loss, then there would be an equal gain in the tax free spreadbetting account?
To get the tax saving, it has to be a genuine gamble. (Otherwise the plan does contain elements that HMRC would not like.) The tax saving is capped - at the tax that's due Jan '22 (not being tax on a residential property gain). The tax cost if it goes the other way is uncapped. I'm not sure which way would be fairly described as disproportionate.
Tax of £77k will not be saved by a loss in that same amount. Loss offset against gain, presumably charged at 28%. So presumably still around £200k of gain to be taxed.
You think HM Gov should cover your loss pound for pound? Your spreadbetting is making you delusional.
See kdbr @10:43. I thought that point too obvious to say.
No, we are suggesting that, if the tax rate is 20% on gains, then tax relief for losses is also at 20%.
I'll leave it to someone else to explain if you still don't get it.
As others have alluded to, the tax offset will be at the same rate as the tax charge.
Anyway, from my viewpoint, you seem to have spent a whole lot of time (over?)thinking methods which will result in you not paying tax, rather than: 1 - enjoying your post-tax gains, 2 - (over?)thinking the next hustle which will land you further gains
I see a lot of people happy to earn mountains, and utterly downtrodden by the - proportional, higher/additional - taxes payable which indicate a social responsibility attached to the privilege(?) of higher income bands. Two sides of the same coin, if you will, each only available with the other.
Higher rates/amounts of tax payable mean your earnings are high, your contribute more toward roads, schools, NHS, etc, and indicate you are doing something -or multiple things - right! Keep doing them, take the tax remaining payable (after legitimate avoidance) on the chin, and see the positives within your situation!
I haven't spent the time analysing in detail what you propose. As a general point, beware of the tax tail wagging the investment dog.