What is the bed and breakfast rule for shares?
Answered 11 March 2026
The "Bed and Breakfast" Rule for Shares
What the law says
The bed and breakfast rule for shares is found in TCGA 1992, s.106A(5) and (5A) and applies for Capital Gains Tax purposes (but not Corporation Tax).
The core rule is: if, within the period of 30 days after a disposal, the person making it acquires securities of the same class, the securities disposed of shall be identified with those securities acquired within that period, rather than with other securities already held.
Key statutory conditions:
- Securities acquired within the 30-day window are matched before earlier acquisitions (i.e., the 30-day rule takes priority over the Section 104 pool).
- Shares identified under the 30-day rule do not form part of, or constitute, a Section 104 holding (s.106A(5ZA)).
- The rule does not apply where the person making the disposal was not resident in the UK at the time of the relevant acquisition (if that acquisition was on or after 22 March 2006) (s.106A(5A)).
- Where shares of the same class are disposed of, they shall not be treated as the same class unless they are so treated by the practice of a recognised stock exchange (s.106A(11)).
HMRC guidance / practice
Purpose of the rule: The rule was introduced in 1998 to counter the practice known as "bed and breakfasting" — selling shares to crystallise a gain or loss and then buying them back shortly afterwards.
Three requirements must all be met for the rule to operate:
- Shares must be of the same class
- Acquired by the same person in the same capacity
- Acquired within 30 days after the disposal
Priority in the identification order: For CGT purposes, disposals are matched in the following order:
- Acquisitions on the same day ("same day rule" — TCGA92/S105(1)(b))
- Acquisitions within the 30 days following the disposal ("bed and breakfast rule" — TCGA92/S106A(5))
- Shares in the Section 104 holding
- Acquisitions after the disposal (earliest first)
Effect: Where the 30-day rule applies, it will normally have the effect of reducing or eliminating the gain or loss that would have arisen if the disposal had been identified with shares already held.
Transactions outside the scope of the rule include:
- A disposal by an individual in a personal capacity followed by an acquisition as trustee of a trust (different capacities)
- A disposal followed by a company reorganisation (e.g. rights issue or bonus issue) under TCGA92/S127, where the additional shares are not treated as acquired within the 30 days
- A disposal of rights treated as a part disposal under TCGA92/S122 and S123, followed by an acquisition of shares with no rights attached
Anti-avoidance overlay: Where a bed and breakfast transaction is used to create an artificial loss on any asset (not just shares), HMRC may also consider the Targeted Anti-Avoidance Rule in s.16A TCGA 1992.
Citation sources
Section 16A TCGA 1992 is a Targeted Anti-Avoidance Rule that deals with the creation of artificial losses. Unlike the rules mentioned above, it can apply to the disposal of any type of asset, rather than just shares and securities. This rule should be considered where a person has entered into a bed and breakfast transaction involving any asset in order to trigger a capital loss (see CG15835).
n with securities acquired at a later time within that period. 5ZA None of the securities which, by virtue of subsection (5) above, are identified with other securities shall be regarded as forming part of an existing section 104 holding or as constituting a section 104 holding. 5A Subsection (5) above shall not require securities to be identified with securities which the person making the disposal acquires at a time when— a he is not resident in the United Kingdom, or b he is resident ... in t
For individuals and others within the charge to Capital Gains Tax on disposals of shares on or after 6 April 2008 the previous identification rules were simplified with the reintroduction of the Section 104 holding for new acquisitions and its widening to include all shares acquired before 31 March 1982 and after 5 April 1998. Section 106A provides that, for matching acquisitions and disposals of shares of the same class in the same company held in the same capacity the identification rules set
Part IV Shares, securities, options etc. Chapter I General Share pooling, identification of securities, and indexation Identification of securities: ... capital gains tax. 106A 1 This section has effect for the purposes of capital gains tax (but not corporation tax) where any securities are disposed of by any person. 2 The securities disposed of shall be identified in accordance with the following provisions of this section with securities of the same class that have been acquired by the person
ties within the meaning of section 104 or any relevant securities, and “ relevant securities ” means— securities within the meaning of Chapter 2 of Part 12 of ITA 2007 (accrued income profits), qualifying corporate bonds, and securities which are interests in a non-reporting fund, within the meaning of the Offshore Funds (Tax) Regulations 2009 ( S.I. 2009/3001 ) (see regulation 4(2)). 11 For the purposes of this section securities of a company shall not be treated as being of the same class unle
The rule was introduced in 1998 to counter what is known as 'bed and breakfasting' of shares. For a general discussion on `bed and breakfasting' see CG13350. Disposals must be identified with acquisitions of shares of the same class, see CG50203 acquired by the same person in the same capacity, and acquired within the 30 days after the disposal. This rule has priority over all other identification rules except the `same day' rule in TCGA92/S105(1), see above. This ‘bed and breakfasting’ rule doe