Key recommendations from the second OTS CGT reform report

Key recommendations

The second report provides fourteen recommendations, which focus on dealing with the awareness of the tax and streamlining the administration behind reporting and paying CGT. The main recommendations to note are the following:

• CGT Reporting – Integration of the different ways of reporting and paying CGT, and introducing one Single Customer Account.
• Extension of the reporting and payment deadlines for UK Property Tax returns from 30 to 60 days. This extension was enacted by government, as announced in the October 2021 Autumn Statement, with 60 days applying as of sales completing from 27 October 2021. 
• Extension of Private Residence Relief to include cases where a taxpayer occupies a property developed in their own garden. This also includes adjustments to allow private residence nominations to be captured through the Single Customer Account.
• Couples separating or divorcing provided the opportunity to retain the spousal exemption when transferring assets between each other on divorce for at least two years after separation.
• Investors - considering whether individuals holding the same share or unit across different portfolios should be treated as holding them in separate share pools to avoid reworking of the gains/losses realised across different investment managers.
• Businesses – considering whether CGT should be paid at the time the cash is received in situations where the proceeds are deferred on sales of businesses or land, while preserving the eligibility to existing reliefs.

Other report highlights

Further recommendations were also made by the OTS around expanding rollover relief rules where land and buildings are acquired under Compulsory Purchase Orders and reviewing the rules for enterprise investment schemes to ensure that current procedural and administrative issues do not prevent many from accessing these schemes. Additionally, suggestions in respect of foreign assets were made to consider whether the gains or losses should be calculated in the relevant currency and then later converted into sterling.

In light of the pandemic and existence of new homeworking arrangements, the report highlights guidance on non-residential uses of the main home. It stresses that legislative provisions and guidance should be updated and made clear that homeworking will not result in a restriction of the Private Residence Relief. Additionally, it recognises the need to update and modernise certain definitions i.e. lodgers, which is outdated and does not reflect current practices. 

What should you do?

As these are recommendations and no changes have been confirmed yet, in many circumstances it may not be appropriate to undertake any definitive tax planning based on these recommendations. However, it is important to be aware of the kind of changes that are under consideration and potentially think about how these may impact you. Click here to read our article on the first OTS report where we delve more into how CGT reform could impact investments, gifts and businesses. 

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