16 July 2020
On 3 June we blogged about what measures might be announced in a 2020 Budget, either in early July or in the Autumn as originally planned. Rishi Sunak’s economic update announcement on 8 July 2020 remained focused on support measures rather than revenue raising. But consultation on future tax measures was widely anticipated to take place over the summer and first out of the traps is a review of Capital Gains Tax.
By open letter on 13 July the Chancellor asked the Office of Tax Simplification to conduct a review of CGT and the following day the scope of the review was published and a call for evidence was opened, part 1 (high level principles) running until 10 August 2020 and part 2 (technical detail and practical operation) running until 12 October 2020.
Anyone with experience of or views on the system is free to contribute to the call for evidence. The timing of the closure date looks highly likely to be geared towards the Chancellor being able to make policy announcements in his autumn budget, potentially with any tax changes then brought into law with immediate effect or, more likely, effective 6 April 2021.
Speculation is already rife, not least since the terms of reference mention “the practical operation of principal private residence relief”, being the exemption preventing the sale of one’s only or main home being taxed.
We consider that a wholesale abolition of this relief would be hugely unpopular and politically risky.
Perhaps easier targets are:
- Removal of the CGT free uplift of assets passing on death, especially where sheltered by IHT reliefs. This was already targeted by the OTS in their report on IHT last year with a view to making gifts in lifetime and transfers on death more equally treated.
- Extensions of the recently introduced 30 day CGT reporting on UK residential property. This would be in line with broader policy objectives of ‘making tax digital’ and could bring a windfall tax collection through acceleration.
- Rate increases or harmonisations. Residential property is already more punitively taxed than other assets (28% compared to 20%) but as headline rates of tax go, these both still compare favourably to top rates of income tax. Also CGT is not part of the Tory ‘triple tax lock’ manifesto pledge and does not generally engender too much public sympathy, often seen as a tax on the rich.
- Abolition of business asset disposal relief (formerly entrepreneurs relief), which was already guillotined (I couldn’t resist a French Revolution reference given this announcement came on Bastille Day) from £10m to £1m lifetime allowance in the spring budget.
Of course this is all speculation and the only people who really know what is on the target list are Rishi Sunak and his staff. Rather than trying too hard to predict what might happen in three or four months’ time we instead suggest our clients stick to the advice in our 3 June blog and make hay whilst the sun shines.
If you have transactions planned or in progress, then think about what the tax cost implications of letting completion drag into any new tax regime might be and compare this to what you’d need to do in order to get the transaction completed either before the autumn budget or before the end of the tax year, locking into a current known regime.
Similarly, if you’re considering inheritance tax or family succession planning then now is the time to take action.
To discuss how this applies to your circumstances please contact Graham Boar or your usual UHY adviser.