In our earlier blog Capital Gains Tax Review we advised that the Chancellor had commissioned a review of capital gains tax by the Office of Tax Simplification (OTS) in July 2020.
Purpose of the review
The purpose of the review was set out in a letter the Chancellor sent to the OTS:
'I would like the OTS to undertake a review of Capital Gains Tax and aspects of the taxation of chargeable gains in relation to individuals and smaller businesses.
I would like this review to identify and offer advice about opportunities to simplify the taxation of chargeable gains, to ensure the system is fit for purpose and makes the experience of those who interact with it as smooth as possible, as set out in the agreed terms of reference.
This review should identify opportunities relating to administrative and technical issues as well as areas where the present rules can distort behaviour or do not meet their policy intent. In particular, I would be interested in any proposals from the OTS on the regime of allowances, exemptions, reliefs and the treatment of losses within CGT, and the interactions of how gains are taxed compared to other types of income'.
The OTS launched a two-part call for evidence; the first section, which closed on 10 August, asked for comments on the principles of CGT. The second asked for more detailed comments on the technical detail and practical operation of CGT. It is the deadline for the second part that has now been extended to 9 November 2020.
Both sections of this call for evidence seek written views from anyone interested in simplifying CGT, including individuals, business owners, professional advisors, representative bodies, and academia. The OTS will also be meeting as many interested parties as it can, online, to hear views directly during the full consultation period.
The OTS has also published an online survey which seeks to gather data from individuals and owner managed businesses about their knowledge and experience of CGT.
Is the review extending beyond simplification?
The scope of the review has been highlighted by the Institute of Chartered Accountants in England and Wales (ICAEW) as going beyond the OTS's simplification remit, as it included a call for comments on the principles of CGT as well as its technical detail and practical operation.
ICAEW's view is that CGT on the whole meets the policy intent as we understand it and the present rules can be clearly understood and interpreted. ICAEW have suggested that the policy objectives of CGT be carefully considered and that if any substantial changes are highlighted this would require careful consideration and review over a significantly longer period than that currently proposed.
ICAEW's tax faculty are in the process of preparing a detailed response to the OTS and the Treasury on the 'simplification review'.
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