If nothing else, the Office for Tax Simplification (OTS) has been busy in recent months. Only this week, we reported how the OTS is recommending that the taxman wants your bank, pension and other financial data to be fed into a new digital tax portal. Today, we’re going to look at recent OTS recommendations for the Capital Gains Tax regime. We’re often asked, ‘How long have you got to pay CGT?’ Not only could this be changing again soon, but a raft of other recommendations could potentially come into force.
What are the OTS recommendations for Capital Gains Tax?
In May, the OTS published a second report on CGT. The first, published in November 2020, focused on the policy and principles underlying the tax. The latest one zooms in on practical, technical and administrative issues relating to CGT.
It’s important to remember that OTS reports are not binding. They contain recommendations, but these do not necessarily become law. It’s up to the government whether to include any recommendations in future legislation.
That said, OTS reports are highly influential, so it’s wise to keep an eye on them. They can give you an insight into what future tax changes are likely to be.
So, how long have you got to pay CGT?
Let’s get the headline question out of the way first. Under the current regime, you need to calculate and pay CGT on residential property within 30 days of selling it. If you have other capital gains to report, you need to inform HMRC by 31st December in the tax year after you made the gain.
The OTS report acknowledges that the short timeframe for paying the property tax has tripped up many people. In response, it recommends extending this period to 60 days OR mandating estate agents or conveyancers to distribute HMRC-provided information to clients about the requirements.
Either way, if you sell a property you will still need to act fast. This is why it’s a smart idea to use our CGT on residential property service – it ensures you pay the correct amount of CGT and avoid penalties.
What other CGT recommendations are in the report?
The OTS report contains a number of other recommendations, which are worth noting. We may return in more detail to some of these, but below is an outline of the proposed key changes:
- The different ways of reporting and paying CGT should be integrated into the Single Customer Account.
- Government should review how Private Residence Relief nominations work. This refers to the system that lets taxpayers choose which eligible home attracts this tax relief.
- The government should consider whether CGT should be paid at the time the cash is received while preserving eligibility to existing reliefs. This would benefit those situations where proceeds might be deferred, such as on the sale of a business or land.
- Government should consider adjusting Private Residence Relief to cover developments in a taxpayer’s garden which the taxpayer subsequently occupies
- Divorcing or separating couples should have a longer timeframe to transfer assets to each other – the ‘no gain, no loss’ window should extend the end of the tax year two years after the separation.
The report also contains other recommendations covering matters such as the rules for enterprise investment schemes and how corporate bonds are treated for CGT purposes. You can read the full report here.
Of course, if you have questions about the current CGT rules or needs help calculating a Capital Gains Tax return, please get in touch. Your THP account manager will be very happy to help.
About Karen Jones
Having worked for one of the world’s largest accountancy firms, Karen Jones uses her tax knowledge and skills to help clients obtain substantial reductions to their tax liabilities.
With an expanding portfolio of tax clients, Karen enjoys the variety her work brings her and particularly likes working with new businesses and people. With a growing number of tax clients, she frequently faces a variety of challenges and relishes the experience she gains as she solves them.
Karen likes the THP ethos: “I like the way the team has a professional, but friendly and down-to-earth approach – it creates a productive atmosphere that benefits everyone.”
Karen’s specialist skills:
- Personal Taxation
- Tax Efficient Planning
- Trust Administration