Capital gains tax: changes are welcome but a full system overhaul is needed

The UK government announced five key technical and administrative changes to capital gains tax (CGT) on 30 November, also known as Tax Administration and Maintenance Day. The changes offer taxpayers some practical simplifications for taxpayers.

STEP is pleased to note that the government has addressed some of our recommendations but is disappointed that the existing system will not be overhauled, which is complex and difficult to navigate, often resulting in unintended consequences.

Context to these changes

STEP submitted a response to the UK Office of Tax Simplification’s second report call for evidence in relation to its CGT review, which was published on 14 July 2020.

The UK government announced on 30 November that it has accepted five recommendations from this report, which will offer some practical simplifications for taxpayers. This will make the system simpler and more efficient in the short term. The government has confirmed that the following administrative issues will be dealt with:

Five key changes:

1. HMRC should integrate the different ways of reporting and paying CGT into the Single Customer Account (SCA), making it a central hub for reporting and storing CGT data.

The government understands the case made to improve CGT and related services for customers. It will consider this recommendation as part of the delivery of the SCA. SCA service development is a long-term strategy for HMRC.

2. The government should consider extending the reporting and payment deadline for the UK property return to 60 days, or mandate estate agents or conveyancers to ensure that their clients are informed about these requirements.

The government announced at the Autumn Budget that the time limit for making a CGT return and associated payments on account when disposing of UK land and property has been extended from 30 to 60 days.

3. The government should extend the ‘no gain no loss’ window on separation to the later of: i) the end of the tax year at least two years after the separation event; or (ii) any reasonable time set for the transfer of assets in accordance with a financial agreement approved by a court or equivalent processes in Scotland.

The government agrees that the ‘no gain no loss’ window on separation and divorce should be extended and will consult on the detail over the course of the next year.

4. The government should expand the specific rollover relief rules which apply where land and buildings are acquired under compulsory purchase orders.

The government agrees that expanding rollover relief to cover reinvestment in the form of enhancing land already owned meets the spirit of the initial rationale of the relief and will consult on the detail in due course.

5. 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.

The government agrees with this recommendation. HMRC has already completed its review and expansion of the guidance on the UK property tax return, which will be published shortly and will proceed to the other areas of guidance listed in due course.

STEP will keep members apprised of any further developments in due course.

Emily Deane TEP, STEP Technical Counsel

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