Neil MacGillivray: Business owners beware of potential CGT changes

OTS report

clock • 4 min read

The recommendations that the Office of Tax Simplification (OTS) put forward in its review of capital gains tax (CGT), published on 11 November, has created quite a stir. Neil MacGillivray warns that, if the key proposals are adopted, current CGT planning opportunities may be lost, particularly for owner managed businesses

The OTS report highlights how the CGT rules can distort behaviour and do not meet policy intent, in particular, their interaction with income tax and inheritance tax (IHT). For example, the lower rates of CGT can act as a motivator for owner managed companies to retain accrued income within their company in the hope they can benefit from lower CGT rates on selling or winding up the business. What grabbed the headlines was the key recommendation that CGT rates should be aligned with income tax rates. The closer alignment of rates would reduce the complex rules needed to police the boundar...

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