The Office for Tax Simplification (OTS) has published ‘Simplifying practical, technical and administrative issues’, its second report on Capital Gains Tax (CGT). It recommends extensions to certain reliefs and a new 60-day deadline for paying and reporting CGT on residential property sales.
The first stage in this review of CGT was a Call for evidence and online survey issued in July 2020. The First response report was published in November 2020 and advised major changes to CGT including increasing tax rates and removing Business asset reliefs. This second report covers a wide range of areas, from moving home to getting divorced, running or investing in a business and issues affecting land transactions.
The report makes fourteen recommendations which include:
- A Single Customer account to keep track of CGT data e.g. capital losses, Main Residence nominations and Enterprise Investments.
- Deferral of CGT payments on the sale of a business or land where Proceeds are deferred without jeopardising reliefs such as Business Asset Disposal Relief.
- Adjusting Private Residence Relief (PRR) to cover certain developments in a taxpayer’s garden and a review of PRR nominations.
- Extending the ‘no gain no loss’ window when a couple is going through a Separation and Divorce.
- Extending the reporting and payment deadline for the UK Property tax return to 60 days.
- Expanding Rollover Relief where a property is sold under a Compulsory Purchase Order.
Many of the recommendations will be welcomed by those taxpayers affected, especially an extension of the 30-day reporting deadline for residential property sales, which the OTS describe as ‘challenging’, to 60 days.
The OTS's recommendations
Awareness and Administration
Recommendation 1
HMRC should integrate the different ways of reporting and paying Capital Gains Tax into the Single Customer Account, making it a central hub for reporting and storing Capital Gains Tax data.
Recommendation 2
The government should formalise the administrative arrangements for the ‘real time’ Capital Gains Tax service, effectively making it a standalone Capital Gains Tax return that is usable by agents.
Recommendation 3
The government should consider extending the reporting and payment deadline for the UK Property tax return to 60 days, or mandate estate agents or conveyancers to distribute HMRC provided information to clients about these requirements.
Recommendation 4
The government should consider whether individuals holding the same share or unit in more than one portfolio should be treated as holding them in separate share pools.
Main homes
Recommendation 5
The government should consider adjusting Private Residence Relief to cover developments in a taxpayer’s garden which the taxpayer subsequently occupies.
Recommendation 6
The government should review the practical operation of Private Residence Relief nominations, raise awareness of how the rules operate, and in time enable nominations to be captured through the Single Customer Account.
Divorce and separation
Recommendation 7
The government should extend the ‘no gains no loss’ window on separation to the later of:
- The end of the tax year at least two years after the separation event.
- Any reasonable time set for the transfer of assets in accordance with a financial agreement approved by a court or equivalent processes in Scotland.
Business issues
Recommendation 8
The government should consider whether Capital Gains Tax should be paid at the time the cash is received in situations where proceeds are deferred such as on the sale of a business or land, while preserving eligibility to existing reliefs.
Recommendation 9
The government should consider enabling an irrevocable provision in the documentation for a corporate bond to specify that it is subject to Capital Gains Tax, and for the absence of such a provision to mean that it is exempt.
Investor issues
Recommendation 10
The government should review the rules for enterprise investment schemes, with a view to ensuring that procedural or administrative issues do not prevent their practical operation.
Recommendation 11
The government should consider whether gains or losses on foreign assets should be calculated in the relevant foreign currency and then converted into sterling.
Land and property issues
Recommendation 12
The government should expand the specific Rollover Relief rules which apply where land and buildings are acquired under Compulsory Purchase Orders.
Recommendation 13
The government should consider exploring ways of removing inappropriate Corporation Tax or Capital Gains Tax charges where a freeholder is in effect only extending their own lease.
HMRC guidance
Recommendation 14
HMRC should improve their guidance in the following specific areas:
- The UK Property tax return.
- Lodgers and people working from home.
- When a debt is a debt on a security.
- When a loan to a business becomes irrecoverable.
- When Business Asset Disposal Relief could apply to farmers or others looking to retire over a period of time.
- Enterprise investment schemes.
- Land assembly arrangements.
- Flat management companies.
Useful guides on this topic
An index to Capital Gains Tax reliefs
Our freeview 'At a glance' guide to which of the key CGT reliefs apply, when and where.
CGT: date of acquisition or disposal: At a glance
Our freeview 'At a glance' guide to how to determine the date of disposal, and the key areas where it is important.
How to calculate a capital gain or loss
This is a freeview 'At a glance' guide to how to compute a capital gain or loss for individuals and trustees.
Reporting CGT: how to do it
A freeview 'At a glance' guide about how to report capital gains. How do you report your capital gains? What return do you use?
CGT Private Residence Relief
A freeview 'At a glance' guide to Capital Gains Tax (CGT) relief on the disposal of your own home. What is Private Residence Relief (PRR)? What are the qualifying conditions? How do you claim PRR
CGT Business Asset Disposal Relief
What is Business Asset Disposal Relief (BADR)? When does BADR apply? What is the rate of BADR? How to claim BADR. This is a FREEVIEW 'At a glance' guide to CGT Business Asset Disposal Relief (BADR), the relief formerly known as 'Entrepreneurs' Relief'.
External link
OTS Capital Gains Tax second report: simplifying practical, technical and administrative issues
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