The Government gave its response to the Office of Tax Simplification (OTS) Capital Gains Tax Review yesterday, as part of the raft of announcements made on Tax Administration and Maintenance Day (TAMD).
Of the 14 recommendations made by the OTS, the government has accepted 5 and will give 5 others further consideration. We have summarised these for you below, but you can read the full written response in the letter to the OTS from the Financial Secretary to the Treasury.
Accepted recommendations include:
- The eventual introduction of a Single Customer Account for reporting and storing Capital Gains Tax data
- The Government accepted and has already implemented the extension to the reporting and payment deadline for making a CGT return on UK Property from 30 to 60 days. This measure was announced at the Autumn Budget
- A possible extension to the “no gain no loss” window on separation or divorce. A consultation is expected over the next year
- A potential expansion to Rollover Relief to cover reinvestment in land and buildings acquired under a Compulsory Purchase Order
- Improved government guidance on a range of specific areas, including UK Property Tax Return Business Asset Disposal Relief and Enterprise Investment Schemes
The 5 areas for further consideration are:
- Formalising administrative arrangements for a real time Capital Gains Tax Service as part of the plans for the Single Customer Account
- Whether individuals holding the same share or unit in more than one portfolio should be treated as holding them in separate share pools
- A further review of Private Residence Relief nominations
- A review of CGT exemptions for Corporate Bonds and Gilt -edged Securities
- A review of the rules for Enterprise Investment Schemes in the context of income as well as CGT
Given the amount of speculation around changes to CGT as a result of the review, its is also worth noting what the government has rejected.
- Private Residence Relief will not be adjusted to cover developments in a taxpayer’s garden which the tax payer subsequently occupies
- There will be no changes to the CGT rules applying where proceeds of a business or land sale are deferred
- Losses and gains on foreign assets will continue to be calculated in sterling, not in their relevant foreign currency as recommended by the OTS
- The rules applying to Corporation Tax and CGT will remain unchanged where a freeholder extends their own lease
In the same letter to the OTS, the government indicates that it does not plan to implement any of the OTS’s recommendations into Inheritance Tax (IHT) at this time, but does not rule out future reforms of the tax.
Richard Coombs, Tax Partner at Bates Weston comments:
“The long awaited Government response to the Office of Tax Simplification’s review into CGT and IHT has finally been delivered. Despite the harbingers of doom suggesting a possible alignment of CGT and income tax rates and the removal of the tax-free CGT uplift on death, the result is somewhat of a damp squib – and damp squibs are generally a good thing when it comes to Government announcements on tax reform.
In summary, all of the IHT proposals have been shelved and only five of the CGT proposals have been accepted, all of which are generally to the taxpayers’ advantage. Some further CGT recommendations are being given further consideration, but given the time that it has taken to get this response I would not expect any further changes any time soon. So overall it is “as you were”.
If you would like to speak with our tax team regarding your own Capital Gains Tax or Inheritance Tax position, please do get in touch.