Typically, the Government would reflect on the state of the country’s financial situation and propose forthcoming tax changes in its Autumn Budget.
This year is different in many ways and the effect the Coronavirus has on nearly every aspect of our life did not stop at the doors of Parliament. On 23 September 2020, the Treasury announced that now is not the time to outline long-term plans and that it has therefore scrapped all plans for an Autumn Budget this year as a result of the pandemic. Consequently, any financial decisions will be put on hold until 2021.
What does that mean for Capital Gains Tax (CGT)?
It would be an incredibly difficult task for Chancellor Sunak to anticipate any tax changes needed to recoup the costs of the pandemic while the world is still responding to a second wave of the virus.
To that end, the Government’s decision not to announce the Autumn Budget makes it likely that any major changes regarding our tax regimes will not be announced until 2021.
As set out in our previous News Flash, in anticipation of the announcement of the Autumn Budget, commentators had suggested that there might be an equalisation of the CGT rate and the income tax rate, i.e. an immediate increase of the CGT rate in order to bring it in line with income tax rates (which are paid at a rate of up to 45%).
The news of no Autumn Budget this year is good news and is welcomed by those who were trying to expedite the completion of any asset sales in order to ensure that any gains would be taxed under the current CGT regime.
Whilst there appears to be a stay of execution, caution should be exercised as the Chancellor’s CGT review is still ongoing and the following areas are very much under scrutiny:
- chargeable gains on shares and securities, including holdings of listed shares;
- the acquisition and disposal of property;
- the practical operation of principal private residence relief;
- consideration of the issues arising from the boundary between income tax and capital gains tax in relation to employees.
Although everything points to any changes to CGT coming into force in 2021, the last 6 months have shown that we are living in unpredictable and unprecedented times. Our view remains that if you are contemplating a sale or are currently negotiating an exit, steps should be taken, whenever commercially possible, to expedite the transaction timetable in order to avoid any unwanted surprises
If you are looking to sell your business, are concerned about the potential changes to CGT or would like to discuss any of the issues we have raised above, please contact Mark Tasker ([email protected]), Stephen Callender ([email protected]) or anyone in our Corporate Team.
This information is necessarily of a general nature and doesn’t constitute legal advice. This is not a substitute for formal legal advice, given in the context of full information under an engagement with Bates Wells.
All content on this page is correct as of October 8, 2020.