Key Post Interaction between a self-directed PRSA and share trading account

[Diarmud]

Hi all, my first question so go easy It's about applying the 4 week rule to a self directed PRSA and separate trading account:

I've been discussing this question with colleagues and can't get a definite answer so would appreciate some help:

I am investing shares in a PRSA Pension account (which I understand is CGT exempt) but also have a separate share Trading Account (which comes under CGT rules). All shares are held for more than 4 weeks before selling.

I know if I sell shares in the Trading Account at a loss and buy the same shares in the Trading Account within 4 weeks then the loss can only be off set against gains made on those repurchased shares.

However, if I sell shares in the Trading Account at a loss and buy the same shares in the PRSA account within 4 weeks does the 4 week rule apply namely that the loss can only be set off against gains made on those repurchased shares (which would be CGT exempt anyway)?

Or are the two accounts considered to be independent (because they are treated differently for CGT purposes) so that I can still set off the loss against other gains made in the Trading Account?

I hope that's clear Thanks. D

 

[Itchy]

However, if I sell shares in the Trading Account at a loss and buy the same shares in the PRSA account within 4 weeks does the 4 week rule apply namely that the loss can only be set off against gains made on those repurchased shares (which would be CGT exempt anyway)?

Or are the two accounts considered to be independent (because they are treated differently for CGT purposes) so that I can still set off the loss against other gains made in the Trading Account?

You have answered your own question! Your PRSA assets are not chargeable assets for CGT.

The 4 week rule is is an anti-avoidance measure. There is no CGT to avoid (or loss to offset) on the asset acquired in the PRSA.

Just to note that if you reacquire more shares than you sold within the 4 week period, normal FIFO rules will apply to the excess shares acquired.

 

[Diarmud]

Hi Itchy, thank you very much for taking the time to reply.

Maybe I don't fully understand your reply but there is a loss on the sale of the asset in the Trading Account that potentially could be offset against other gains in calculating CGT payable on the Trading Account.

Is that loss in the Trading Account effectively ignored because of the immediate repurchase in the PRSA or can it still be applied to offset other gains in the Trading Account?

Thanks again for taking the time. Have a good weekend all D

 

[Gordon Gekko]

My sense is that the answer lies in the fact that the PRSA assets aren’t owned by the individual, so they don’t count.

 

[Diarmud]

Thanks Gordon, much appreciated, I looked into that and apparently (certainly in this case) the individual is the beneficial owner of the PRSA assets so I don't think that can be the (full or only?) reason.

It must be quite common for individuals to trade shares within a PRSA Account and also separately within a Trading Account so this question of the 28 day rule and off setting losses must come up quite often if they happen to be trading in the same companies?

Thanks again for taking the time. D

 

[Itchy]

Is that loss in the Trading Account effectively ignored because of the immediate repurchase in the PRSA or can it still be applied to offset other gains in the Trading Account?

I see what you are getting at now. You can retain the loss for offset in your trading account. Not an expert but my sense is that you can effectively think of the accounts as separate. For example, you can trade away in the PRSA account and there are no tax implications. The reverse situation wouldn't make sense to me i.e. you sold at a loss in the PRSA account and you purchased in the trading account. It would be illogical for the four week rule to apply. However, I cant find any source that addresses your question directly. Why don't you shoot a query to Revenue directly?

As I said, the four week rule is an anti avoidance measure. There is no gain or loss to avoid in the PRSA, so why would your actions outside the PRSA impact the tax treatment.

 

[Gordon Gekko]

I’m not convinced by that at all. The assets of an ARF are “owned” by the ARF holder but my understanding with pensions is that the individual does not own those assets.

It’s why a creditor can’t go after them.

 

[Diarmud]

Thanks Itchy, that view seems to make sense but like you I can't find a source that addresses it directly. Have been in contact with Revenue but they have just quoted the guidance document which doesn't help so am pursuing that with them.

Gordon, thanks again for that too.

Just for info, I looked again at the providers general FAQ's which include "If you have financial instruments in your ... account using the ... nominee service, you remain at all times the “beneficial” owner of those investments, even though a company independent of ..... or a nominee company ...... may be registered as the “legal” owner...."

I think these are general FAQ's but my understanding is that it applies to PRSA and Trading accounts. I'm sure these things are far more complex than a quick FAQ 'soundbite' so I'm open to correction on that and not arguing, just passing on the info I've been given. It also seems there may a difference between 'beneficial owner' and 'legal owner'.

Thanks again for your comments, greatly appreciated and any other thoughts you have would be welcome. D

 

[Itchy]

Have been in contact with Revenue but they have just quoted the guidance document which doesn't help so am pursuing that with them.

Are the potential capital gains significant enough for you to pursue it?

 

[Itchy]

Have been in contact with Revenue but they have just quoted the guidance document which doesn't help so am pursuing that with them.

Are the potential capital gains significant enough for you to pursue it?

 

[Diarmud]

Are the potential capital gains significant enough for you to pursue it?

It's a k or two of tax which is better in my pocket than theirs but the main point would be whether I need to compare trades in the two accounts when considering this 28day rule. If so I'd have to do this for years to come until I retire.

I'm hoping it's as simple as you and Gordon suggest, that it either comes down to ownership or simply that the PRSA is CGT exempt and so doesn't need to be considered.

In either case there must be a reason why Section 581(3) doesn't require trades in the PRSA to be taken into account.

All thoughts on that are welcome!