Major CGT Review: Individuals and Smaller Businesses
Capital gains tax (CGT) has been targeted for review by the Chancellor of the Exchequer in a drive to simplify the taxation of chargeable gains and its administration - and make it better and fairer. Particularly in sight is how it relates to individuals and smaller businesses.
To that end, a call for evidence was issued this summer by the Office of Tax Simplification (OTS), along with an online survey – with views being sought from individuals, academia, business and professionals (and professional bodies). Particular areas of concern within the Capital Gains tax review - call for evidence are the more complex aspects of CGT and how they can be improved.
Introduced back in April 1965, the nature of CGT has remained essentially static but there have been significant shifts and changes in the rates and thresholds, and how the tax interrelates with income tax and supporting reliefs.
CGT is not a huge money-maker for the exchequer and while previous reviews and reports have touched on CGT, this is the first in depth review of it. Rishi Sunak has made clear that he wants the system to be fit for purpose as well as making the experiences of individuals and businesses as smooth as possible.
In his letter to the OTS on 13 July, he said: “This review should identify opportunities relating to administrative and technical issues as well as areas where the present rules can distort behaviour or do not meet their policy intent.
“In particular, I would be interested in any proposals from the OTS on the regime of allowances, exemptions, reliefs and the treatment of losses within CGT, and the interactions of how gains are taxed compared to other types of income.”
The first part of the call for evidence (which related to the principles of CGT) has closed – but the second part remains open until 9 November.
Operation of CGT
The second part is the key focus of the consultation and detailed comments are invited on the detail and practical operation of CGT – such as structural CGT issues; acquisition and disposal; the different rates of CGT; common issues affecting taxpayers; payment of CGT; and the administration of estates.
The OTS is attempting to identify areas where existing rules can distort behaviour or do not meet their “policy intent”. The review is wide-ranging, covering aspects including the overall scope, rates of tax and relief, exemptions and allowances; the potential for distortions to personal or business investment decisions and how CGT interacts with the wider tax system; and a range of further technical and administrative issues.
However, not within scope of this particular review are issues relating to corporate groups.
Responses to the call for evidence can be sent to ots@ots.gov.uk. The OTS specifically asks for practical real-life examples to illustrate any broader points made in responses.
If you would like us to cover an issue in the next NGM Tax Law Newsletter, we would be pleased to hear from you