This reply is accompanied by a Governmental review into the use and necessity of the OTS, as we have reached the important milestone of five years that the OTS has been busy simplifying the tax system. Whether by some design, the five year anniversary is marked by five proposals being accepted and five which are to be considered further by the Government.
Whilst many of the accepted proposals are far from revolutionary changes, such as moving deadlines, improving administration and data reporting systems etc., a recommendation which was not commented on is the noteworthy highlight of the letter. The first OTS report, published 11 November 2020, suggested that the Government should align CGT rates more closely with Income Tax rates. The main crux of this recommendation was simply to raise more tax, although such a drastic legislative move could lead to impacts such as increased asset holding through companies, due to lower tax rates on chargeable gains made by companies, and more tax gathered from inflationary movements, which may call into question the fairness of the tax itself.
The Governmental letter detailing the response mentioned that the first report had been read but that ‘careful thought’ had to be given on the impacts of such reforms. So, for now, silence on the issue is indeed golden but there is every chance when future funds are needed for the Exchequer, CGT could be an easy beast to target. Some of the accepted proposals include: the Government will seek to publish improved guidance on areas such as Enterprise Investment Schemes, Business Asset Disposal Relief in respect of farmers, and UK Property Tax Returns; Increasing the no gain-no loss window on separation and divorce; and delivering a Single Customer Account service in which reporting and payments of Capital gains can be made.
On IHT, the reply was simple and therefore our commentary will be equally so: the government acknowledged that the OTS had made a number of suggestions which would lead to simplifications of reliefs and the overall IHT regime, but no further action will be taken.
Well, there we have it! We can expect some nice changes heading our way on the technological side of how data is gathered, and information is shared by the Government, but we might have to wait a bit longer for a real shake-up of the tax system.
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