In a paper published by the statutory body this week the OTS claimed that the current CGT system was “counter-intuitive” and “creates odd incentives.”
The report goes on to set out a framework of policy choice within which the government could consider simplifying the design of CGT, to “smooth out bigger picture distortions”, improve administrative efficiency and make the tax “easier to understand” and predict.
However, UHY Hacker Young has said the OTS proposal which includes reducing the annual tax-free amount for CGT to £1,000 and double-taxing heirs on both CGT and IHT on some inherited assets like second homes is “unfair.”
Graham Boar, partner at UHY Hacker Young said that the OTS plans “would essentially upend much of the tax system” and considering the amount of disruption it would cause its hard to see “how this would create a more user-friendly CGT system.”
He added that the proposals seem designed to “increase tax revenue” and add complexity rather than simplify CGT, stating the move would “create some huge winners and losers.”
Boar added: “This is a vital relief that plays a big role in helping businesses retain their best staff. Along with the suggestion of making entrepreneurs pay CGT on capital saved in their business for retirement, these proposals could easily be seen as an attack on business.
“Making CGT much more punitive, on top of the already-unpopular IHT system, would be a very risky move for the chancellor to make.”