In May 2021, the Office of Tax Simplification made a number of recommendations for simplifying the capital gains tax system. The government has now accepted some of these. What’s the full story?
The Office of Tax Simplification periodically makes recommendations at the request of the government regarding the tax system. In May 2021 it published a report making 14 recommendations for overhauling the system of capital gains tax (CGT).
Among these was the alignment of CGT rates with income tax rates. Investors will be pleased to know that the government has rejected that proposal. However, in a letter to the OTS, the Financial Secretary to the Treasury has indicated that five of the recommendations will be enacted. Some of these are administrative in nature, but there are two very welcome pieces of news:
• The window for the no gain, no loss exemption is to be extended until the end of the tax year following the year of divorce or permanent separation. This will give former couples at least twelve months to distribute assets between themselves. In contrast, the current rules only apply the exemption in the year of separation, meaning it can be a matter of mere days.
• The rules regarding rollover relief will be extended to reinvestments in land following a disposal made under a compulsory purchase order.
These changes remain subject to consultation and draft legislation, so it is unlikely that they will be enacted for 2022/23.
If you have any queries regarding CGT, please contact us.
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