This can often be missed due to a lack of awareness of the rule. Also, where a taxpayer is posted overseas for work, the property can still be considered their main residence even if they rent it out and do not return, allowing the growth in value to accrue tax free.
The OTS has suggested that the election and claims process is simplified, including capturing more information including private residence nominations through the single customer account.
Deferred consideration on the sale of a business
The sale of a business is very rarely a simple cash transaction. Typically, the vendor will receive deferred consideration either in the form of cash instalments or loan notes. This can mean that either CGT is charged on the whole consideration up front regardless of whether the funds have been received, or there are inconsistencies in tax treatment, once the vendor has stepped away from the business.
The recommendation is to remove these inconsistencies and simply tax the cash when it is received. This is welcomed in principle and would remove the cash flow problems that are created by ‘dry’ tax charges. As ever there are those that would seek to use these rules to their advantage so consideration would need to be given to circumstances where the taxpayer moved abroad, reassigned the consideration or passed away. Hopefully these issues will not outweigh this actually very sensible suggestion.
Standalone recommendations
Divorce and separation
Currently, the CGT treatment on the transfer of assets on divorce and separation depends on the timing. Where transfers are made in the year of separation the transfer is treated as a no gain/no loss transaction and no CGT is due. Transfers after the tax year of separation are at market value and therefore unanticipated tax consequences can arise often affecting the financial settlement.
The ‘transfer window’ is often too narrow to enable financial decisions to be made in time and therefore couples are often hit with a tax charge as well as sizable professional fees.
The OTS has therefore recommended an extension to this window of up to two years following the year of separation, or any reasonable time set for the transfer of assets as part of a court settlement. This solution is much more reflective of today’s world where mediation can often be the preferred way forward and having this derailed by penal tax consequences is not helpful.
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