On 11 November, the Office of Tax Simplification (OTS) published the first part of its report into simplifying the design of Capital Gains Tax (CGT).
Rather than simplify the operation of CGT, many of the recommendations in the report seek to radically overhaul CGT and provide a potentially significant source of tax revenue for the government.
As we noted in July, [www.fladgate.com/2020/07/cgt-reform] there are certain steps that can be considered ahead of any potential changes to the tax system. For example, in order to try to lock in current CGT rates whilst retaining control of businesses, individuals may consider transferring their shares to a trust or family-owned company. Alternatively, business owners may consider accelerating their exit plans to enjoy the benefits that come from current reliefs.
Although at this stage it is unclear what decisions the Chancellor will take, reform provides an opportunity for individuals, trustees and companies to take stock of their current arrangements and plan for the future.
The report highlights potentially behaviour-distorting features of the existing CGT system and makes 11 recommendations in four main areas: (1) rates & boundaries; (2) the Annual Exempt Amount; (3) interaction with Inheritance Tax (IHT); and (4) business reliefs.
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