Laying the bogy of capital gains tax: A night's bed-and-breakfast can have a refreshing effect on your financial position, explains Vivien Goldsmith

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THERE are still steps shareholders can take to avoid tax before the end of this financial year.

It may be too late to put shares into a personal equity plan, but there is still time to bed-and-breakfast shares to establish a new buying price for capital gains tax purposes despite the looming Easter weekend.

Individuals have an allowance of pounds 5,800 gains after inflation each year. If it is not used within the tax year it is lost.

Anyone who can imagine that capital gains might become an issue should think about bed-and-breakfasting shares.

Justin Urquhart-Stewart, director of business planning at Barclays Stockbrokers, says there is a new generation of people learning bed- and-breakfasting.

'Super-Sid characters with portfolios of pounds 10,000 to pounds 15,000 are begining to realise that they might have a tax liability,' he explains.

He says people are beginning to put shares into PEPs and swap shares between husband and wife to minimise the chance of having to pay capital gains tax.

Anyone can use a Barclays branch for B&B. The minimum charge is pounds 28 for selling with a free repurchase, plus stamp duty. Existing Barclayshare customers can use the telephone service, which has a minimum charge of pounds 20.

The bank will accept B&B trades up to 3.30pm on Tuesday 5 April.

Most brokers and banks will do special B&B deals and market-makers will not expect their normal spread between buying and selling prices. But B&B trades still attract 0.5 per cent stamp duty.

Brokers do not require certificates for telephone dealing and proof of share ownership, such as a dividend slip, will probably be sufficient for a B&B trade in a branch.

Inland Revenue rules say there has to be an overnight gap between buying and selling.

But a sale can take place at 4.29pm one day and the shares can be bought again the following morning at 8.01am with minimal exposure to market moves.

Lloyds Bank will do the sale and repurchase for the cost of one deal - 1.5 per cent with a minimum fee of pounds 18.50 and a maximum of pounds 150.

Lloyds investors can either sell up to next Wednesday and repurchase next day or they will have to wait until after the Easter break and sell on 5 April and repurchase the shares in the new tax year.

The deadline for PEPs is

29 March, so a B&B trade ahead of that date would not now qualify as the last Stock Exchange settlement date was 21 March.

The deadline for B&B at Sharelink is Monday, and it is too late to put the shares into a PEP.

Midland Bank will do B&Bs in branches up to 5 April. It charges 1.5 per cent for sales with a minimum fee of pounds 20 and a maximum of pounds 75, with a free repurchase for B&B deals for Midland customers only. First Direct customers can deal over the telephone.

Abbey National has a B&B deadline of 5pm on Monday. There is a flat rate pounds 10 fee plus selling commission with a minimum of pounds 24.50 - a minimum for the deal of pounds 34.50.

Norwich and Peterborough Building Society will do B&B deals until 5 April. It charges 1 per cent commission on the first pounds 5,000, with a minimum of pounds 17 and a flat repurchase fee of pounds 5.

Richard Larner, managing director of Waters Lunniss, the stockbroker owned by N&P, said anyone who was keen to put shares into a single company PEP was too late for a straightforward 'bed-and- PEP' but it was possible to do it with bridging finance.

Investors who had cash or access to an overdraft could sell their current holdings and use cash to buy the same shares to put into a PEP. But they would have to wait for the next Stock Exchange settlement day, 18 April, for payment on the shares they had sold.

B&B trading has been quiet lately at the private client stockbrokers Henderson Crosthwaite. The marketing manager, Richard Twydell, said investors were nervous about the stock market and some had been selling their shares to establish their capital gains for 1993- 94 but were reluctant to buy them straight back, believing they could buy them more cheaply at a later date.

There is no longer any point in undertaking a B&B to establish a loss, as losses that only arise because of indexation are disallowed.

Frank Akers-Douglas, head of private client services at the chartered accountants BDO, said: 'It is normally better to wait until the investment increases in value so that the full indexation relief can be allowed against the sale.'

----------------------------------------------------------------- SELECT PRIVATISED COMPANIES ----------------------------------------------------------------- Company Launch Current Launch Indexed FT-SE 100 Estimated date price p price p* launch at launch dividend price p yield % BT1 03.12.84 396 130 202 1191.7 5.3 BT2 09.12.91 396 335 349 2409.6 5.3 London Electric 11.12.90 586 240 261 2165.8 4.7 Manweb 11.12.90 714 240 261 2165.8 4.2 Anglian Water 12.12.89 494 240 286 2363.5 5.7 Wessex Water 12.12.89 663 240 286 2363.5 4.5 Abbey National 12.07.89 473 130 159 2256.7 4.2 TSB 10.10.86 212 100 143 1599.4 5.0 * fully paid ----------------------------------------------------------------- Source: Henderson Crosthwaite -----------------------------------------------------------------

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