CIOT response to PBR

CAPITAL GAINS TAX CHANGES

The Chartered Institute of Taxation (CIOT) comments on the Capital Gains Tax (CGT) changes that have been announced by the Chancellor in his Pre-Budget Report.

John Barnett, Chairman of the CIOT’s Capital Gains Tax and Investment Income Sub-Committee, says: “The proposed 18% flat-rate of CGT will in the longer term represent a significant simplification of Capital Gains Tax. Simplification of the tax system is something the CIOT has long called for and to this extent we give a guarded welcome to the proposals. We also welcome the opportunity to consult on the draft legislation later in the year.”

The CIOT calls for tax changes to be fair and to give certainty to taxpayers. The CIOT believes that the proposals fail in this respective. In particular there are no transitional provisions and the CIOT anticipates significant market distortions over the next 6-12 months as some transactions are brought forward and others may be delayed.

John Barnett adds: “All those who are in the process of making disposals, or who are likely to do so in the near future need to consider whether their tax position might be significantly different if the transaction were delayed until after 6 April 2008.”

NON-DOMICILE PROPOSALS

The Chartered Institute of Taxation (CIOT) has issued this comment on the proposals regarding non-domiciles in the Chancellor’s Pre-Budget Report.
Emma Chamberlain, CIOT Chairman of the Succession Taxes Sub-Committee, says: “Foreign domiciliaries gain no certainty from these proposals since the Government has announced that they are also looking at other loopholes. The result, is in fact, further uncertainty.
The CIOT believes this is not the intended consequence of the proposals.

Emma Chamberlain adds: “The CIOT hopes that the Government will introduce one simple statutory test on residence to end the current climate of uncertainty, which is very damaging for the mobile worker in the current global environment. Under present law a person who emigrates may not always under present law be able to determine whether he remains UK resident or not. We would welcome consultation on any proposed domicile and residence changes.”

CHANGES TO INHERITANCE TAX

The Chartered Institute of Taxation (CIOT) comments on the changes to inheritance tax (IHT).
Today’s Pre-Budget Release has introduced a proposal for the introduction of a “transferable nil-rate band” between spouses and civil partners. It will now be possible for the survivor spouse or civil partner to ‘double-up’ on the nil rate band (currently £300,000, increasing to £350,000 by 2010) on gifts made by them under their will.

Emma Chamberlain, Chairman of the CIOT’s Succession Taxes Sub-Committee, says: “This change is very welcome because it will save couples the need to jump through complicated hoops when planning their tax affairs for the first spouse’s death. It will make little difference to the well-advised who will have already structured their affairs so as to use the nil rate bands of both couples but it is a genuine and welcome simplification for Middle England.”

Couples will now be able to benefit fully from both partners’ exemptions without the need for complex tax planning on a first death. The CIOT particularly welcomes the fact that widows/widowers and surviving civil partners whose partners died many years ago without using their nil rate bands will also benefit because those who have already lost their partner will now be able to make use of their deceased partner’s otherwise wasted allowance. The proposals have been well thought out and are not hedged around with caveats or unnecessary anti-avoidance provisions.

Emma Chamberlain adds: “The change will not, however, help cohabiting couples or siblings living together. We are also concerned that there continues to be discrimination against transfers to surviving spouses who are domiciled outside the UK since they will only qualify for a £55,000 spouse exemption. We do not think this accords with EU law and suggest the Government needs to consider change in this area.”

SIMPLIFICATION AND CONSULTATION

The Chartered Institute of Taxation (CIOT) welcomes the Chancellor’s announcement in the Pre-Budget Report committing the Government to simplification and consultation.
The Chancellor, Alistair Darling, stated that the Government would hold three reviews on simplification for the following three areas: VAT, associated companies and anti-avoidance.
Rob Ellerby, CIOT President, says: “The CIOT has long argued that the tax system is too complex and welcomes the fact that the Chancellor is committed to simplifying the system. The CIOT believes that consulting with the tax profession is the best way to achieve tax law that works and meets the Government’s objectives.”