Chancellor Rishi Sunak has asked the Office of Tax Simplification (OTS) to carry out a thorough review of capital gains tax (CGT).
He requested to analyse the aspects of the taxation of chargeable gains in regard to individuals and small businesses.
In the 2016 Budget, there was a drop in CGT, apart from on property. At that time, the 18% rate dropped to 10% and the 28% rate dropped to 20%.
Mr Sunak requested a review to identify and offer advice about opportunities to simplify the taxation of chargeable gains, to ensure the system is fit for purpose and makes the experience of those who interact with it as smooth as possible, as set out in the agreed terms of reference.
Why did the Chancellor requeste for a review of Capital Gains Tax?
Moreover, the review of CGT should identify opportunities relating to administrative and technical issues. It should analyse the areas where the present rules can distort behaviour or do not meet their policy intent.
In particular, the Chancellor said that he would be interested in proposals from the OTS on the regime of allowances, exemptions, reliefs and the treatment of losses within CGT, in addition to the interaction of how gains are taxed compared to other types of income.
Blick Rothenberg described the review as an “inevitable tax raid” to recoup some of the money spent during the Covid-19 lockdown period, describing the potential changes as “bad news for investors”.
Nimesh Shah, a partner at Blick Rothenberg, said:
“After all the good news at last week’s Summer Statement, this is probably an early indication from the Chancellor that CGT is the first tax set to rise.”
The OTS has published a call for evidence in the form of an online survey, which seeks views on CGT. The OTS wants to hear from businesses, individuals, professional advisers and representative bodies about which aspects of CGT are complex. Moreover, the survey will help OTS to find suggestions on how the tax can be improved.