On the 11th November, the Office of Tax Simplification (OTS) published its policy paper “OTS Capital Gains Tax Review: Simplifying by design”. This is the first of two reports – the second, to be published early next year, will explore key technical and administrative issues.
Over the next few years, HMRC will need to look to ways to refill the Government’s coffers to pay for the costs associated with the coronavirus pandemic. Capital Gains Tax seems like an obvious place to start. This report provides a detailed analysis of some of the areas under review including the possibility of increasing Capital Gains Tax to better align it with income tax rates.
OTS Capital Gains Tax Review: Simplifying by design
This first report sets out a framework of policy options, which government could consider when simplifying the design of Capital Gains Tax with the goals of smoothing out bigger picture distortions, improving the administrative efficiency and making Capital Gains Tax easier to understand and predict.
The report has identified four interconnected areas, which affect Capital Gains Tax:-
- The rates and boundaries
Do the rates and boundaries of Income Tax and Capital Gains tax distort behaviour?
- Annual Exempt Amount
Does the relatively high level of the annual exempt amount affect decision making?
- Inheritance tax and lifetime gifts
Would it be better to encourage people to transfer their personal and business assets during their lifetime rather than on death?
- Business reliefs
To what degree should Capital Gains Tax reliefs be used to seek to stimulate business investment and risk-taking?
Second Report – Early 2021
No doubt the second report, to be published in 2021, will answer many questions. However, if you do have any areas of concern in the meantime, please do not hesitate to get in touch with the team at DRG Chartered Accountants.
For further information
Gov.uk website: Policy paper: OTS Capital Gains Tax Review: Simplifying by design
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