While the offshore life business and the Association of British Insurers lobby the British Government to reconsider its proposed capital gains tax reforms, accountancy firm Grant Thornton has said the state of the nation's finances means concessions are unlikely to be granted.
The proposed flat rate of CGT announced in the pre-Budget report last month has drawn criticism from offshore life companies because it favours unwrapped collective investments. The withdrawal of indexation and taper relief has also angered many onshore bodies as it is seen as penalising entrepreneurs and longer-term investors.
But Grant Thornton has said major concessions in the tax system, particularly on capital gains tax, are unlikely as the Government is on course to overshoot its public borrowing forecasts by £6bn and needs every ounce of revenue it can lay its hands on to minimise overspend.
Maurice Fitzpatrick, a tax expert at Grant Thornton, said: "It is inconceivable that the Government would wish to increase public borrowing forecasts, therefore, it is expected that additional revenue will have to come from the tax system. In order to cover an overshoot of £6bn, the Government would have to raise taxes equivalent to an additional £250 per household per annum.”
He added that proposed changes to the residence and domicile laws next year are likely to be “revenue raising initiatives intended to sate a cash-hungry Treasury”.
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