Capital Gains Tax: is clarity coming?
It’s fair to say that there’s a general sense of limited, or misunderstanding surrounding Capital Gains Tax (CGT). The Chancellor requested a review into CGT a year ago and the Office for Tax Simplification (OTS) produced the first part of its report last November, the second in May.
A single customer account?
A key recommendation made by the OTS was to integrate CGT into a new single customer account, to “ease the administrative burden” for those who report CGT. That’s around half a million people every year, but – crucially – it’s on a one-off basis for most. Currently, reporting is done either via self-assessment, 30-day reporting or using the real-time CGT service.
Extending reporting and payment deadlines?
Another area covered by the review was the 30-day reporting and payment deadline for residential property disposals, which only came into force in April 2020, yet is much-criticised.
The OTS recommended that the deadline is increased to 60 days, or that estate agents or conveyancers become more involved in the process, to make the timeframe less of a challenge. However, in the last six months of 2020 alone, over £1.3 million was raised in late filing penalties, so will HMRC want to make any changes?
Private residence relief
The OTS also made recommendations to change the nomination procedure for second homes. These were: a review of the practical operation of nominations, increasing awareness of how the rules operate and – again – the use of a new, single customer account.
Divorced and separated couples
Currently, divorced and separated couples do not incur CGT on transfers between themselves, for the tax year that they separated – it is unlikely that many of them will have transferred their assets within this timeframe, though. The OTS recommended that relief be extended until at least two years after separation or after any reasonable time set for the transfer of assets, once a financial agreement between the couple is in place – whichever is later.
Will the Chancellor accept any of these recommendations? We’ll find out in the autumn, when the future of CGT may finally start to take shape.