UK : Using 30 day wash rule to my advantage before moving to India ?

For investors outside the US. Personal investments, personal finance, investing news and theory.
Sister forums: Canada, Spain (en español)
---------------
Post Reply
Topic Author
bluejeansman
Posts: 289
Joined: Sun Oct 19, 2008 6:50 pm

UK : Using 30 day wash rule to my advantage before moving to India ?

Post by bluejeansman »

British naturalized citizen in UK with investments in US. No US green card or citizenship.

Think I may found a loophole in international taxation.

Let us say I am sitting on considerable capital gain in AAPL shares in US. This is offshore investment from UK standpoint from unremittted money. I pay tax on arising basis in UK on any onshore and offshore dividends etc.

If I am going away to India for a few years, here is strategy to realize my AAPL gains with very little tax without the help of tax havens : will this work ?

1. Plan to become non resident in UK from April 2025
2. In March 2025, while UK resident, sell AAPL and buy back within 2 days.
3. Say I bought the asset 18 years ago at $10 a share, I sell it at $100 in March 2025, buy it back at $101 within 2 days.
4. No UK CGT because of 30 day wash rule
5. After relocating to India in Apr 2025, sell the asset for say $105. India tax will be only on 105 - 101 = $4 since India does not have 30 day wash rule and cost basis would be $101
6. wire the money into UK in the usual pool of investments. Interactive Investor says they will accept new money even after I become non resident.
7. Stay non resident from UK for 3 years

Would Step 6 then be taxable in UK ?

I have 3 pools of US money :
A) Former employer shares - no its not AAPL
B) Etrade : VTI : Vanguard Total Stock Market Index Fund ETF.
C) Vanguard : VTSAX : Vanguard Total Stock Market Index Fund US : This is non reporting Fund so far as HMRC is concerned

If my trick works, it will work only for (A). It will work for (B) but Etrade will not allow me to buy back VTI while I am UK resident so Step 2 will fail. The trick probably wont work for (C) since 30 day wash rule etc probably do not apply for non-reporting funds.

But (A) is a sizeable chunk for me.

Another question for the tax guru then. Reason to do this is to get out of US investment and move it all to UK. The larger my UK asset base, the lower the wealth manager charges will be, should I decide to use one. Also it will be a single source of funds for my folks in case something happens to me.
Topic Author
bluejeansman
Posts: 289
Joined: Sun Oct 19, 2008 6:50 pm

Re: UK : Using 30 day wash rule to my advantage before moving to India ?

Post by bluejeansman »

I guess this is an international tax question. Or perhaps I should have posted on one of those tax forums.

In any case, If you sell an asset and buy back the same within 30 days in UK in a taxable account, there is certainly no capital gains tax in the UK, am I right ? And this applies to onshore shares / unit trusts and offshore shares / mutual funds / ETFs which have UK HMRC distributor status ? I guess so, but wanted to check.

Regarding India treatment of capital gains and 30 day wash rule, I will find out on my own.

Appreciate any thoughts.

Oh well. Thanks for listening.
TedSwippet
Posts: 5279
Joined: Mon Jun 04, 2007 4:19 pm
Location: The rainy island next to France

Re: UK : Using 30 day wash rule to my advantage before moving to India ?

Post by TedSwippet »

bluejeansman wrote: Wed Jun 05, 2024 2:09 am In any case, If you sell an asset and buy back the same within 30 days in UK in a taxable account, there is certainly no capital gains tax in the UK, am I right ?
Yes. From abrdn:
However, the rules can offer an invaluable way of amending the capital gain or loss position on a sale that may have been placed in error.

Where an investor has sold an asset and created a large gain, it's possible to buy back into the fund within 30 days and the share matching rules may mean the large gain is largely replaced by a much smaller one or possibly even a loss.
This is not limited to sales placed "in error"; you can use it intentionally if circumstances warrant.

The above is all UK tax, and assumes a UK tax-resident. I have no clue how this would feed into your Indian (or any other country) tax.
Topic Author
bluejeansman
Posts: 289
Joined: Sun Oct 19, 2008 6:50 pm

Re: UK : Using 30 day wash rule to my advantage before moving to India ?

Post by bluejeansman »

Thank you so much for the valuable response Tedswippet.

Of course I will validate with a tax specialist.

Cheers
jg12345
Posts: 468
Joined: Fri Dec 11, 2020 12:03 pm

Re: UK : Using 30 day wash rule to my advantage before moving to India ?

Post by jg12345 »

If you could post here a brief response from the tax specialist it would be great! although specific to India and your case of course, but it might be helpful to others
Thanks!
Topic Author
bluejeansman
Posts: 289
Joined: Sun Oct 19, 2008 6:50 pm

Re: UK : Using 30 day wash rule to my advantage before moving to India ?

Post by bluejeansman »

Spoke to a reputed Indian tax advisor yesterday.

As far as 30 day wash rule is concerned, India will only look at last purchase price as the cost basis. The fact that it is not considered as capital gain in UK is immaterial to India.

Thus, I can potentially take advantage of this : Bought stock when dinosaurs roamed the earth at $1, sell in March 2025 at $100 while UK resident and RNOR from India standpoint (resident but not ordinarily resident), completely out of UK by Apr 2025, sell in May 2025 in India at $110, and book profit of only $10 in India. But I must stay out of UK for several years.

Have not clarified with US/UK tax gurus yet, but I am fairly certain that the response from TedSwippet is correct. But yes I need to validate.

Just wanted to update. Usually I am a consumer here, thought let me give something back.
Post Reply