Bed And Breakfast Deal
Categories: Banking, Investing, Entrepreneur
No bed and breakfast deal is ever worth it, because the rooms are always weird and stuffy and you have to talk to strangers in the morning, which everyone knows is the worst time to have to talk to strangers. Plus any normal hotel will have a free continental breakfast anyway, so what's the point?
But we digress. There's also a financial definition here.
The way capital gains taxes have historically been computed in the U.K., there's been a benefit to not holding a stock from one fiscal year to another. So to keep the tax bill as low as possible, some traders used to sell their positions on the last day of one fiscal year and then buy them back on the first day of the next fiscal year. That process was known as a Bed and Breakfast Deal.
The government figured out what was going on and changed the rules in the late 1990s so that investors had to wait 31 days before buying back the position. So a modified Bed and Breakfast is still possible, but only with the 31-day gap. This leaves opens the possibility of missing some action in the market during the interim, making the decision to try to avoid taxes this way more complicated.
