News
PRE BUDGET REPORT 2007 - CAPITAL GAINS TAX REFORM - FLAT RATE 18%
A major overhaul of Capital Gains Tax (CGT) was announced by the Chancellor in his first Pre-Budget Report this week. The proposed changes will not affect the rules for company gains.MAIN CHANGES - DISPOSALS OF CHARGEABLE ASSETS AFTER 5 APRIL 2008
- Abolition of taper relief
- Abolition of indexation relief (available on assets acquired before April 1998)
- Flat rate CGT of 18% (applying to individuals, trustees and personal representatives)
The Chancellor indicated that the new measures were designed to tackle the perceived abuse of taper relief by those working in the private equity industry but actually affect all persons liable to UK CGT.
EXAMPLES
TAX COST INCREASED AFTER 5 APRIL 2008: Individuals owning business assets (e.g. trading assets, shares in qualifying trading companies, some investment property) may currently benefit from full Business Asset Taper Relief on disposal. This can result in an effective 10% CGT rate. This rate will be a flat 18% for disposals after 5 April 2008.
TAX COST REDUCED AFTER 5 APRIL 2008: Individuals owning non-business assets (e.g. shares in investment companies, some investment property) may at present pay CGT at an effective rate of between 24% and 40% on an indexed gain, depending on how long the asset has been owned. This rate will be a flat 18%, but with no indexation relief, for disposals after 5 April 2008, regardless of how long the asset has been owned.
PLANNING
Although detailed legislation is not yet available and the proposals may be subject to change before 6 April 2008, we recommend that you review your assets now. With careful tax planning, you may be able to avail of a lower CGT rate e.g. by bringing forward a disposal of business assets or crystallising a gain on such assets before 6 April 2008, or by delaying a disposal of non-business assets where appropriate.
If you would like to discuss these changes and how they might impact upon you please contact a member of our Tax Team below on 028 9031 1113 or by email:
Lyn Hagan haganl@goldmac.com
Paul O’Connor oconnorp@goldmac.com
Correna Coburn coburnc@goldmac.com