Capital Gains Tax (CGT) may soon be under review. What does this mean?
The Chancellor of the Exchequer, Rishi Sunak, has recently written to the Office of Tax Simplification (OTS) asking them to undertake a review of Capital Gains Tax.
Why is Capital Gains Tax under review?
In particular, Sunak has asked the OTS to review how CGT affects individuals and small businesses. The review is to consider all of the current reliefs, exemptions and allowances, looking at whether these influence behaviour in a manner which might not be what the legislation intended.
What does this mean for small businesses and individuals?
One suspects that the review is likely to lead to an increase in the amount of CGT that is recovered. At present only a relatively small number of taxpayers (around 300,000) pay CGT in any particular tax year. There are generous allowances and reliefs available and it is possible that this review signals the beginning of the end for some of those.
When will the changes to Capital Gains Tax be implemented?
The letter does not set out a timescale within which the Chancellor expects a response but one suspects that he is looking to put the new measures in place sooner rather than later in the light of the substantial Government expenditure that has occurred over recent months to deal with the Coronavirus outbreak.
It is possible that reliefs such as entrepreneurs’ relief and hold over relief, both of which play a major part in estate and business succession planning, may be under threat.
What should you be doing to prepare for the changes?
We recommend individuals and indeed small business owners look at whether now would be the appropriate time to put in place or bring forward estate planning or succession planning measures that might benefit from the existing reliefs which may not apply in a year or so.
If you have any questions, our Private Client team are happy to help.