Will CGT Rates Go Up?

Will CGT Rates Go Up?

The OTS report highlighted the mismatch between CGT and income tax rates which currently encourages taxpayers to prefer to take profits as capital rather than income. This potential opportunity has been addressed recently in the case of company liquidations where there is now a targeted anti-avoidance rule. There has also been increased scrutiny of share for share exchanges and company share buy backs by HMRC. Both of these transactions, if properly structured, can currently be taxed as capital gains instead of income.

The CGT annual exempt amount is currently £12,300 which is considered a very generous de minimis. It is important that taxpayers do not need to report trivial disposals of capital assets but perhaps we will need to get used to a more modest limit going forward. Consider making use of the current generous limit whilst it is still there.

A possible change that has featured in a couple of OTS reports recently concerns the treatment of property passing on death. Although the value of the property is subject to IHT, there is currently no CGT and also a tax free uplift to market value for CGT purposes.

The OTS recommendation is that the value for CGT purposes should be the deceased person’s base cost. Although there would still be no CGT to pay on death, the reduced base cost would mean a larger gain and CGT liability on subsequent sale.

We are hoping that the current business asset disposal relief that provides business owners with a 10% CGT rate on disposals will continue to apply as this encourages entrepreneurs to build successful businesses.

If you would like more information or would like to discuss your tax affairs in more detail please don't hesitate to contact our Tax Partners, Steve Crompton or Lucy Williams, on the details below:

 
Steve Crompton
Partner – Head of Tax
direct dial: 01942 292541
mobile: 07790 840394
email: steve.crompton@jsllp.co.uk
 
Lucy Williams
Tax Partner
direct dial: 01942 292543
mobile: 07807 053494
email: lucy.williams@jsllp.co.uk

 

 

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