Many traders and investors look to defer or rollover capital gains on shares or other financial investments. You would firstly need to consider how your activities were to be taxed.
If you were an investor and subject to CGT there would be no scope for rolling over capital gains. The capital gains on your disposals have already arisen and crystallised. Whatever you do with the proceeds (with one exception) would not effect the gains that have already arisen.
You could invest proceeds into shares that qualify under the EIS scheme. In this case provided the proceeds invested are equivalent to the gain to be invested a special form of rollover relief is available.
Opening long and short positions
It may be possible to roll over capital gains by opening two correlated trades. eg. ftse June and September contracts, but one long and the other short. On 5th April, close out the losing trade, and on 6th April close out the winning trade (maybe open another temporary position on 5th April to mitigate the overnight risk).
However, in order eliminate most of the capital gains you may need to open uncomfortably large positions relative to your net worth and the liability would still be there for future tax years.
Example
You would open one long position and one short position effectively hedging your risk (eg June call contracts bought at say £1.00 for the long, and then September puts at 75p for the short).
If the price rose you this would equate to a gain on the long and a loss on the September. You would therefore close the short position before 6 April 2009 and crystallise the capital loss. The loss would then be offset against the capital gains on your other activities as above.
The gain on the exercise of the call option could be crystallised in the new tax year.
Any loss on the closing out of the short would look to be allowable. Certainly, there are matching rules for options which can match disposals with acquisitions in the next 30 days. However this only applies to options within the same series (same class and same expiry date and expiry price) and therefore should not apply in this example. There would of course also still be the liability that for next year.
If you were a trader you would be looking to assess your profits/loss for the entire tax year/accounting period. Therefore, any loss on the final transaction on closing the losing position would reduce the trading profits. The main caveat here is that you’d need to assess the accounting treatment of the loss and subsequent profit.
In particular as accounts are prepared according to generally accepted accounting practice, and given that this usually matches the underlying income with the expenditure it should be considered. Having said that it is doubtful that this would alter the position given there’s a clear commercial & financial separation between the two contracts and that there is a general principle that losses/profits cannot be anticipated.
It’s also worth noting that spread betting profits are free from tax. If it could be ensured that the losing trade were subject to capital gains, but the winning trade were a spread bet, that would eliminate the tax liability. But you would need to be able to predict which way the market would move. If the trade went the wrong way the result would be a doubling of the liability.
