Capital Gains Tax review
Executive summary
- AAT notes that 60,000 individuals (just over 0.1% of adults), each with gains of £100,000 or more, collectively took 88% of all taxable gains between them. Simplification of the Capital Gains Tax regime will therefore benefit the majority of individual taxpayers and wider society as a whole and is therefore supported by AAT.
- AAT acknowledges that scrapping Private Residence Relief (PRR) would raise significant funds for the Exchequer. However, it would also severely stunt growth in the property market as many people would be further discouraged from moving. As a result, AAT believes PRR must be maintained.
- No Capital Gains Tax is payable on company takeovers and mergers if less than £3,000 or an amount less than 5% of the value of an individual’s shares in the company are received. This exemption should be scrapped and the annual exempt amount (AEA) could instead cover any share growth in such circumstances.
- The £6,000 chattels exemption should be removed, and any such gains covered by the existing general AEA of £12,300.
- Gift relief could also be removed given it only covers certain gifts in certain situations and largely benefits the wealthiest in society.
- AAT suggests that the OTS give serious consideration to recommending that the Capital Gains Tax rate for investment property be brought into line with other asset classes. Whilst this would ideally occur on a permanent basis, a temporary change would at least provide some relief for the increasing problem of reluctant landlords being unwilling to sell their properties.
- AAT repeats its long standing commitment to the cessation of what is now called Business Asset Disposals Relief (formerly Entrepreneurs' Relief).
