Avoid Capital Gains Tax in Ireland | 'Bed & Breakfast Sales' Explained
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- Опубліковано 14 лип 2024
- A 'Bed & Breakfast Sale' is a tax harvesting strategy you can use to reduce the amount of CGT you need to pay when investing in stocks and crypto in Ireland. Each year, Irish investors get a €1,270 capital gains tax exemption that can help reduce their tax bill. However, if you don't use it, you lose it! In this video, we explain how to ensure you make the most of this tax exemption every year.
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💡 Key Learnings:
0:00 1️⃣€1,270 CGT Exemption
0:47 2️⃣What is a 'Bed & Breakfast' Sale?
1:07 3️⃣Why Do it?
3:08 4️⃣3 Things to Remember
4:15 5️⃣Step by Step Example
8:31 6️⃣Example Summary
9:31 7️⃣Conclusion
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🔗 Useful links:
Selling or disposing of shares - revenue.ie www.revenue.ie/en/gains-gifts...
Bed & Breakfast Sale (UK) - www.investopedia.com/terms/b/...
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Heya folks - we'll be doing another video in the coming weeks with other ways to avoid/reduce your capital gains tax liability, but this is one method to get you started! As always, any questions - hit us up below 👌
Outstanding video lads! Excellent examples! There’s always that risk of the share price increasing during the 30 day window but if done right it’s great fro reducing those tax bills!
Thanks a mill for watching! You're so right, such a delicate balance to get right during the 30 days. If the share price goes down, though, you're golden. 😎
- Cian
Very good video lads. Didn’t have a clue about B&B but up to speed now 💪🏼
Thanks a mill, Karl. You get better value from it in the UK, for sure!
- Cian
Folks, please do more content. I moved to Ireland and have so many questions about investing strategies and opportunities. So please upload new videos on this topics)
I feel like the guys in revenue doing the call Centre customer service aspect don’t know anything about CGT I’ve called more than once trying to get info on cgt before discovering this channel every time someone would answer I’d ask about cgt they put me on hold and then the phone disconnects
Hey Ray - similar experience to us. The phone operators seem to be able to quote whats on the website, but anything beyond that scope seems to get passed along for someone else to "check in the legislation". Then you're simply left waiting!
At least if you have written proof that you went looking for answers, it will be hard for revenue to come back and penalise you if you have that support in place (within reason of course). And again, speculation on our part - but would seem only fair.
Another good video on what can be a little known subject. For me though, simplicity trumps complexity, particularly when trading fees, stamp duty, taxes are involved... but more important, you need to be confident of your affairs when it comes to Revenue - little room for accounting errors. Is that €400 worth the complexity (and the risk of unfavourable swing in price)? Maybe yes for some.
Keep up the great videos.
Thanks for the comment and summary! Indeed, the bed & breakfast sale certainly isn't for everyone, and for many, just not doing anything might be the simplest and easiest approach. But as you alluded to, €419 per year, can add up over time if managed correctly! Cheers for watching
outstanding
Really appreciate the feedback Abdel 👌
Great video lads, really love the channel. Quick question I repurchased shares the next day before I knew about the bed and breakfast rule as I’m a relatively new investor. What’s the implication of repurchasing immediately, I’ll be sure to use the 30 day rule going forward.
Heya Conor, cheers! - just one clarification, did you repurchase after making an initial LOSS or a GAIN? If its a gain, I wouldn’t worry about it. We’ve spoken to revenue on multiple occasions and no has been able to confirm (or deny) that the 30 day rule applies to the GAIN side of the transaction.
If you sell for a loss, and then repurchase within 28 days you just won’t be able to offset that loss against your gains (see shares sold with 4 weeks of acquisition link below)
www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/selling-or-disposing-of-shares.aspx
As always great video guys.
Just to be sure we use that technic only during a tax year. So we sell our stocks and repurchase them after 30 days in the same year?
June '21 UPDATE: In relation to asking revenue about the 30 day rule when selling stocks for a GAIN and then repurchasing immediately vs needing to wait 30 days, this is the response we have received so far:
"Dear Stephen,
I have now raised this enquiry with a senior supervisor for further clarification and am awaiting an update, I will revert back once I have received any information on this enquiry.
Regards"
July '21 UPDATE: Still waiting on a response 😑
@@TheLearningsReport any updates in Oct 21? :-) thanks lads, your videos are so useful!
@@carlosgarciagomez2365 Hey Carlos, thanks for keeping us honest on this! So I did actually eventually get a response to this, but the reason I didn't post it, was because it's a pretty unhelpful response 😅 Here's a copy and paste:
Start. "I have re-raised this with a supervisor and have been advised of the below.
Capital Gains Tax is a self-assessed tax. Where a taxpayer has a doubt in relation to the application of the legislation they should either express that doubt in support of the declaration (return) or in advance of a transaction, make a submission to the Revenue Technical Service in the manner provided. If you have have doubts you should ask a broker or asset manager.
In this instance, please cite the sources you are referring to in relation to the confusion (we will examine Revenue resources only, legislation, notes for guidance, T&D Manuals and the website notes themselves (and our own RevNet))
If you are taking third party notes into consideration, you should go to that source for verification." End.
The sources that I referred to in my first message to them (and which they make reference to in their response), are the various third party sources you will find when trying to dig into the issue yourself (a combo of financial advisors, regular folks like ourselves, and a few others).
In rough summary, I unfortunately still don't have a clear answer. To be honest, given the responses I've received, I don't think I'll be following the 'rule'. I've made every effort to try get a response, and there's no clear answer on the website or otherwise - so I'll deal with that issue if (or ever) it was made one!
- Ste
@@TheLearningsReport thanks guys for the videos. It seems Revenue does not know either what has to be done.
With your 'I don't think I'll be following the rule', you mean you won't wait the 30 days? I'll be inclined to do the same as 30 days it's a lot a the price the fluctuate too much.
cheers
ale
@@alessandrosordilli8404 hi Ale. Still no confirmation! Yes, referring to the 30 day period. I think it's your call on the 30 day rule - Ste has a record of correspondence with Revenue so it might be worth checking with them and if they can't refer you to the rule you can at least refer to the correspondence as you tried to clarify.
If they do give you an answer, PLEASE let us know! 😂
- Cian
That's very smart. I love loopholes. It makes it look like you did not make any gain (because you didn't when you bought your shares back);
whereas you actually made the same gain (because you did not lose money compared to when you first bought your shares).
And you make your gain on not being taxed on these 1500$
But what if when you buy it back the price has increased a lot ?
Hi Laurent,
We're big fans of loopholes too! 😉
And it's a very good question. This is the risk involved, the asset increasing in value. On the flip side, it could decrease in value in the period!
If you are already going to use your exemption for some other sale then this isn't really applicable but if not then it's up to you to assess whether the risk of price increase is worth taking for the €1,270 tax saving.
We'll be sure to share more loopholes as we uncover them! Thanks again for watching.
- Cian
@@TheLearningsReport excellent!
@@TheLearningsReport If you make a loss on selling btc (let's say 1200 euros)
but then 1 week later you buy btc again and 1 extra week later you make a profit on selling btc (let's say 2400 euros),
can you deduct your previous loss (1200) from your profit (2400) ? Hence getting an actual profit of 1200 (which is below the exemption).
You mentioned you should wait 4 weeks to buy back if you wish to offset your loss
but crypto is so volatile, you cannot afford waiting 4 weeks.
Does Revenue take this into account ?
@@_el.guapo_ Yes, you need to think of it in aggregate. In other words, come tax season, you need to look at all your losses and gains as a whole - and figure out what your liability (if any) is. In your example, yes - no tax would be due as your losses offset some of your gains.
If you want to offset your losses against your gains for tax purposes, you need to adhere to the 4 week rule. It's your choice to invest in crypto, stocks, etc, so it's your choice to deal with the volatility!
Brilliant video 🙌 What do yous think would happen if revenue picked up on sold stocks/crypto that you didn’t pay tax on?
Cheers Bryan, glad you liked it.
So your guess is good as ours, but revenue do have general guidelines in terms of the penalties (quoted below). That being said, it'd likely be dealt with on a case by case basis. They can't catch everyone - simple as. And the penalties of course would likely be more severe the more money you're making, or whether it was 'accidental' or 'on purpose', etc.
Revenue's Guidelines for charges:
"The surcharge is a percentage of the total tax payable for the year for which the return is late. The percentage amount is set according to the length of the delay in filing. The amount of the surcharge is also subject to an overall cap.
The surcharge is calculated as follows:
- 5% of the tax liability for the year of assessment to which the tax return relates,
subject to a maximum of €12,695, where the tax return is delivered within two
months of the filing date;
- 10% of the tax liability for the year of assessment to which the tax return
relates, subject to a maximum of €63,485, where the tax return is not delivered
within two months of the filing date."
www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-47/47-06-08.pdf
www.independent.ie/business/personal-finance/penalties-for-not-paying-your-fair-share-26344358.html
@@TheLearningsReport Thank you, lads. That clears up a lot 👍
No sweat!
nice video guys! Would you know how those bonus/welcome/referral shares are looked at from tax point of view?
pretty much all "broker" sites these days give you 20/30/50$ worth of random shares when you join via someone's link. Would the day of getting them into your account be something that you should report as some kind of gain or on the day of disposal you would basically count the selling price as your gain and pay tax on that(since you got them for free)?
Great question. So our understanding is that these shares should be seen as 'income' and submitted as 'other income' when doing your tax return (form 12 if the amount is less than €5k across the tax year in question). So if you received a bonus stock of $100, you would pay income tax on the $100 amount. Then, in 2 years if you decided to sell that share, you would pay CGT on the profit (if any) when you do. The cost basis for calculating the tax due when you sell, would be the value of the share on the date it was given to you ($100 in this example, but whatever the applicable amount would be).
So in short, you're taxed on the value of the share when you receive it, and then taxed again when you sell it!
- Ste
Such a great video lads, thanks a million! Just a quick question (might be a silly one) , is it ok to use the B&B model selling shares on lets just say Revolut, and rebuy them on a different broker like DEGIRO without complications?
Hey Emma,
Thanks a million for watching!
In short, yes. Revenue won't be concerned by which broker you use. We would still recommend to follow the 30 day rule (which we are still looking for confirmation on!).
- Cian
I guess just to add a point of contrast to Cian's mention of the 30 day rule - although it might be wise to always err on the side of caution like Cian mentioned, we have asked Revenue numerous times for confirmation on whether it is or isn't applicable, and we have never received a clear answer. So personally, I (Ste) would probably take a more flexible approach to adhering to the 'rule' (or potential rule) based on my experience so far. But again, not advice (etc etc) 😅
The more people that plague revenue for an answer, will hopefully leave to some clearer guidance!
Cheers,
- Ste
Did you receive the answer from Revenue?
Does this apply to crypto?
Great video lads, might be a stupid question, but can I take the 1270 gain from one stock and invest it into another stock straight away and not wait 30 days ?
Hey Conor - when you say 'take', are you saying that you would sell one position (e.g. Apple), make a profit of €1270, and then buy Amazon instead? If so, then yes.
The '30 day rule' (which again, may not actually be a rule as revenue literally won't explicitly answer the question), but that would be more in relation to your selling Apple, harvesting €1270 profit, and then reinvesting back into the same stock straight away.
If you just sell and buy something else, that's absolutely fine 👍
- Ste
@@TheLearningsReport yes that’s what I meant, thank you for clearing that up. Keep up the good work lads, there’s a lack of clear info on taxation of stocks in Ireland so it’s great to see it being displayed in a clear and easier way to understand.
Nice one and appreciate it! Cheers
No response from revenue yet? Their website and citizens information only mentions the 30 days wait for loss harvesting.
Heya Ben - Thanks for the follow-up. So yes we got an answer, but it was all but useless. Here's the thread of the brief chat we had.
Our email:
Hi there,
I have two quick questions. Can you clarify the buy/sell rule for stocks that you wish to offset against your CGT liability?
If I wish to utilise my €1,270 exemption and offset my gains, I know that I can sell some shares at a gain to the value of less than or equal to exemption, increase my cost basis, and then re-purchase the exact same shares (thereby reducing my future tax liability down the road). However, there is contradictory information on how long I need to wait before repurchasing the shares. Some sources say that you can repurchase immediately (e.g. the next day), while some say you need to wait 30 days?
Secondly, there is also reference to the scenario when you sell your shares at a loss, and wish to offset these against CGT. On revenue.ie it says you must wait '4-weeks' before you can repurchase the shares you sold for a loss (if you wish to offset against your gains). Is it correct to say that it's 4 weeks if you sell at a loss, and 30 days if you sell for a gain? Seems confusing.
Thanks for your help in advance.
Revenue's Response:
Dear Stephen,
I can only advise that the information contained on the Revenue website is correct, therefore the waiting period to repurchase shares sold for a loss is 4 weeks.
Regards
So yes, not really that helpful as it basically doesn't acknowledge our questions at all! We also spoke to revenue directly on the phone (prior to this email interaction) and the two people I spoke to said they had no idea, and that I needed to email as someone would need to look into it.
I'm not sure if you've come across any of the sources online that mention the 30 day rule (from a gain standpoint), but happy to link you what we've found. Until we get something in writing from revenue, it's hard to say either way!
From a personal viewpoint though, and going by the info I've received, I wouldn't be very worried about it regardless as nobody seems to know 😂
@@TheLearningsReport Thanks for that. I can't imagine it'd be worth revenue's time or money to prosecute people who rebuy instantly given the complete lack of clarity. They'd want to be right vultures to stress over €1270
Hey Ben - missed this one. In short, totally agree, but as you can imagine we want to be a bit careful giving people that sort of guidance when we don't 100% know ourselves! But yea, we share your opinion on this one.
- Ste
What app do you trad on
I (Ste) use Interactive Brokers primarily! Cian has more ETF holdings and has used Degiro a bit more extensively.
What app are you leaning towards yourself?
- Ste
Within 30 days ??? I would wait till 31 days
5:55 gossip girl lol
😏