'Have I accidentally committed tax fraud?'

I sold shares for a profit and then rebought the same shares on the same day. 

I’ve just realised that I may be in trouble and should have waited. 

Will selling again now help? What penalties might I face?

A Which? Money member

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'You won't be punished, but you won't benefit either'

Mike Croxford, Which? Money expert, says...

The practice of selling shares one day and then buying them straight back the next (or shortly after) used to be known as ‘bed and breakfasting’. 

It was a tactic to reduce capital gains tax bills.

The purpose was to realise either a loss or a gain, as the loss could be used to offset other gains made during the same tax year, while the gain could help to make use of the annual tax-free capital gains allowance, which would otherwise have been lost. 

Any future gains would then be calculated from the price at which the shares were repurchased. 

However, the benefits of such a transaction were removed by rule changes in 1998. 

You must wait 30 days before buying back the same shares (with the exception of Bed and Isa transactions, where you sell existing investments and buy them back within an Isa). The share price could rise during this period, making it a riskier tactic.

The good news is that HMRC won’t punish you. However, the bad news is that HMRC will ignore the sale of the shares when calculating any future tax bill. 

This means that when you sell in the future, your gain will be calculated from when you originally bought your shares, so you won’t see any tax benefit. 

You may also have incurred fees from your investment platform when selling and buying the shares.

Couples can find a way around the 30-day rule. One partner could sell the shares and the other could buy them straight back, thereby minimising time out of the market.

• Find out more: Capital gains tax rates and allowances 

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