The report seeks to rectify this and align the rules for a sale to a builder with a new build. It could actually be said that the easiest way to do this would be to remove relief for the sale to the builder. The OTS however has been kinder and has suggested that instead the start date for relief to apply on the new build should be aligned with the period of ownership.
Additional recommendations
Reporting and paying CGT
As we mentioned earlier the government are keen to encourage taxpayers to use the real time reporting method and the OTS has suggested a standalone CGT return to help with this. While this may make reporting easier it will still accelerate payment of the tax which is not likely to be popular.
The UK property tax return currently has a 30 day deadline which is ambitious and often missed. This is generally due to a lack of awareness until the transaction is ready to go ahead.
The OTS has recommended that the deadline be extended to 60 days which seems more practical.
Enterprise investment scheme (EIS)
The Enterprise Investment Scheme was introduced to encourage investment in to early stage companies. Whilst the tax incentives are generous, the practical issues around the application process can be cumbersome and there are concerns that this discourages companies from applying.
One of the issues is the requirement for payment of the shares to be made at the exact time of issue. Where this goes wrong tax relief can be denied through practical issues alone. Equally, exemption from CGT can only be given where income tax relief is claimed. It is not always possible for the taxpayer to know their exact income details at the time of the investment particularly in today’s circumstances so again relief can be denied.
The OTS has suggested that the government review these policies and procedures to ensure maximum take up.
Foreign assets
Where foreign assets are sold the current requirement is to exchange the acquisition cost and the sale price into sterling at the dates of purchase and sale. This can cause anomalies where the exchange rate has fluctuated compared to the actual gain or loss on the asset.
The OTS has suggested that this be simplified and the gain itself exchanged to sterling at the time of the transaction. Whilst this is simpler, it will not take account of any currency gains which historically the taxpayer was obliged to report. With one in ten taxpayers having an offshore interest this has wide relevance so I suspect the government will need to be satisfied with the economic position before they implement this.
Property issues.
