OTS Suggests Removing Tax Free CGT Uplift On Death
Although The Office of Tax Simplification (OTS) were tasked with simplifying Inheritance Tax (IHT), they also considered the interaction with Capital Gains Tax (CGT) as many asset transfers potentially have both CGT and IHT implications. Currently there is no CGT on assets transferred on death and the recipient inherits the asset at its market value.
It has been suggested that the Capital Gains Tax uplift on death distorts decision making relating to assets that benefit from an exemption from Inheritance Tax. Where an individual holds such an asset that has risen in value, and is considering transferring it during their life, they are often advised to retain it until death rather than giving it away during lifetime, because of the tax benefits.
Where a business is retained until death, any potential capital gains are wiped out and there is no Inheritance Tax to pay. This could lead to an asset being retained rather than being transferred to the next generation at the time that is right for the business.
We will again monitor the progress of this proposed change as it is likely to have significant implications on family business succession planning.
To find out more about this, contact our Tax Partner, Steve Crompton, on the details below:
Partner – Head of Tax
direct dial: 01942 292541
mobile: 07790 840394