The OTS publishes their second review on simplifying Capital Gains Tax

On 20 May 2021 the Office of Tax Simplification (OTS) published their second report on their review of Capital Gains Tax (CGT) in response to the Chancellor’s request to identify opportunities to simplify the current UK CGT regime. 

The new OTS report highlighted that many have a limited awareness or understanding of CGT and their individual obligations. 

Capital Gains Tax is paid by relatively few people each year – In 2017-18 only 265,000 people paid CGT in contrast with 31 million people who paid Income Tax. However, the rules impact many as it is generally paid infrequently* or the gains realised fall within exemptions. (*1.5 million different taxpayers reported taxable gains in the 11 years to 2017/18)

It goes on to provide 14 recommendations which on the whole we think are sensible and fair, including the following areas– 

• Capital gains reporting – The current three methods of reporting capital gains should be integrated and completed in one single customer CGT account. 
• UK property tax return - The current 30 day reporting and payment requirement for taxable gains made on disposals of UK residential property should be extended to 60 days. 
• Private residence relief – The government should review the rules on nominating a home as a main residence to make them better known and simpler.
• Divorce and Separation - Couples that are divorcing or separating should continue to benefit from a tax neutral transfers of assets for at least two years after separation.
• Deferred consideration and CGT - The government should review the current rules on whether CGT should be paid upfront in situations where proceeds on a sale of a business are received at a later date.

The OTS report also provides recommendations covering areas of CGT such as share pooling, private residence relief on garden developments, corporate bonds, foreign currency and foreign assets, rollover relief, enterprise investment schemes, and flat management schemes. 

To read a full copy of the OTS report please click here.

To read our previous summary of the OTS’ first review, click here. 

If you have any questions, contact Fiona Hall.