Chancellor Rishi Sunak has confirmed that the government will implement some of the recommendations for simplifying Capital Gains Tax (CGT) put forward by the Office of Tax Simplification (OTS)
However, the OTS’ more radical proposals, such as aligning capital gains and income tax rates, will not be pursued.
As well as directing HMRC to improve its CGT guidance to taxpayers, the Chancellor has tasked HMRC with implementing reforms to:
- Increase the filing deadline for the standalone CGT return on residential property gains from 30 days to 60 days (announced in the Autumn Budget 2021).
- Extend the time window for no gain/no loss transfers of assets between separating/divorcing individuals by a year (there will be a consultation on this).
- Expand CGT Rollover Relief to cover reinvestment in the form of enhancing land already owned (there will be a consultation on this).
- Consider integrating the different ways of reporting and paying CGT into the ‘Single Customer Account’ that HMRC is developing.
In addition to accepting these recommendations from the OTS, HM Treasury is still considering:
- The idea of a standalone CGT return system online (rather than the current combined income tax and CGT Self-Assessment return).
- Treating individuals holding the same share or unit trust unit in more than one portfolio as holding them in separate share pools for CGT purposes (which would make calculations simpler and potentially facilitate automated online filing).
- A review of the practical operation of Private Residence Relief nominations by taxpayers, and raising awareness of how the rules operate.
- The way CGT exemptions for corporate bonds work.
- The rules for Enterprise Investment Schemes to remove procedural or administrative issues that prevent their practical operation (the Treasury may carry out a much wider review of these reliefs).
However, there is to be no change to the CGT treatment of a disposal where proceeds are deferred, nor any change to the complex way that gains on foreign assets are calculated (converting values to sterling at each relevant date will continue).
The treatment of housing developments in a taxpayer’s garden will not change, nor will the treatment of a freeholder extending a lease.