The Office for Tax Simplification (OTS) has issued a second report on Capital Gains Tax (CGT).
The latest paper follows last November’s report and makes recommendations to simplify CGT reporting.
Previously, the OTS had recommended increasing the rate of CGT and cutting the CGT allowance, but these proposals have yet to be implemented by the Chancellor.
This report covers several areas from moving home to getting divorced, running or investing in a business, or in relation to particular issues affecting land transactions. The OTS has also highlighted a broader concern about the low level of public awareness of the tax, and the extent to which the administrative systems could do more to support taxpayers.
AJ Bell financial analyst, Laith Khalaf, suggested the new recommendations from the OTS will “broadly make things simpler” for investors and business owners, if adopted.
“Probably the most meaningful proposal is to allow divorcing couples more time to pass assets between them without incurring any CGT, thereby giving them breathing space to restructure their financial affairs after separation,” Khalaf highlighted.
“It’s good that the OTS is trying to raise awareness, iron out wrinkles, and simplify capital gains calculations for investors, but it remains a fiendishly complex tax. The saving grace is really the limited number of people who pay it, thanks to a relatively generous annual allowance, and the availability of tax shelters like ISAs and SIPPs.
“The OTS actually thinks the annual allowance should be cut drastically, which would leave many more taxpayers on the hook for CGT, and having to get their heads round all the complexities involved. So far the government hasn’t adopted that recommendation, much to the relief of investors up and down the country.
“The OTS may well feel the Chancellor has left them hanging after failing to enact their previous recommendations to increase CGT. However, these latest proposals are more technical than ideological, so will not be as controversial to enact.”
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