Capital Gains Tax ' Second Report From The Office Of Tax Simplification

• Published date: 10 June 2021
• Subject Matter: Tax, Inheritance Tax, Income Tax, Capital Gains Tax, Property Taxes
• Law Firm: Wrigleys Solicitors
• Author: Mr Orlando Bridgeman

In this article we look at the numerous reports and policy papers surrounding tax reform.

There has been a steady flow of reports and policy papers on tax reform coming from various bodies over recent years, making different recommendations on different taxes with different objectives - it can seem rather confusing to the casual observer.

The Office of Tax Simplification (OTS) has added to the contributions with a second report on Capital Gains Tax (CGT), which includes some interesting observations for rural and farming businesses.

The OTS's remit is to recommend improvements to the administration of tax and simplification of the tax rules. It also puts forward thoughts on policy design, and this caused its first report on CGT to be received with interest. In its first report, the OTS made some radical proposals for the policy design of CGT such as:

• aligning the rates of CGT with income tax;
• reducing the annual exempt amount which is currently '12,300 for individuals; and
• reforming Business Asset Disposal Relief (formerly Entrepreneurs' Relief). The second report will generate less commentary. It makes sensible proposals on some of the practical technical and administrative issues relating to CGT. These are specific and include:
• extending the reporting and payment deadline for the UK property tax return from 30 days to 60 days;
• extending the 'no gain no loss' window during which divorcing couples can transfer assets between themselves - it is suggested to the later of (i) the end of the tax year at least two years after the separation event and (ii) any reasonable time set for the transfer of assets in accordance with a financial agreement approved by a court;
• reviewing the operation of Principal Private Residence Relief nominations;
• reviewing the rules surrounding taxation of deferred proceeds of sale e.g. on the sale of a business or land; and
• improving HMRC guidance in specific areas.

The impacts of the Capital Gains Tax report on rural businesses

Buried towards the end of the report are some comments on the future of rural businesses that will be of interest to Wrigleys' landowning and farming clients.

The OTS report observes that the current CGT rules can deter modern farming businesses from diversifying (or, in our experience, present traps for those that diversify without taking professional advice) if doing so may prevent access to valuable CGT (or inheritance tax) reliefs.

The report also flags up the tax problem for landowners caused by the...