|
This legislation will be introduced in the Finance
Bill 2008 and will apply to disposals made on or after the 6th
April 2008. The current rules remain
in force until that date.
The proposals are:-
- From 6th
April 2008 gains on disposals will no longer form the top slice of an
individual’s income. They
will instead be taxed at a flat rate of 18 per cent. The annual exemption will remain
(currently £9200).
- Trustees
and Personal Representatives will continue to receive half of the annual
exemption and will also be taxed on gains at the rate of 18 per cent
rather than the current rate applicable to trusts of 40 per cent.
- Taper
Relief will be withdrawn.
- Indexation
Relief with be withdrawn.
- The
“Kink Test” will be abolished. Assets acquired before 31st
March 1982 will automatically assume a cost equal to the market value at
that date. It will no longer be
possible to elect for the cost price to be substituted.
- Halving
Relief will be abolished. This
relief reduced a chargeable gain which because of the previous operation
of certain relief’s effectively includes a deferred gain relating
to a period before 31st March 1982.
- Share
identification will be simplified.
The abolition of Indexation and Taper Relief will make the
current complicated system easier.
From 6th April 2008 all shares of the same type in the
same Company whenever acquired will be treated as one asset or
“share pool”. The
rules relating to same day acquisitions and disposals and the bed and
breakfasting rules will remain.
The
implcations
- The
withdrawal of Taper Relief is of particular significance especially for
those currently claiming maximum business taper relief which results in
an effective rate of 10% on gains.
The changes represent an increase in the rate to 18% and consideration
may need to be given to making disposals prior to 6th April
2008 in order to benefit from the relief.
- Those who
have assets which were acquired before April 1998 (when Indexation
Relief was replaced by Taper Relief) and which are entitled to significant
indexation relief may also wish to benefit from this by making disposals
before 6th April 2008.
- Non
taxpayers who have gains in excess of the Annual Exemption may also
suffer in respect of gains which could currently fall into the starting
rate of tax which is currently 10%.
This is based on our understanding of the proposed
legislation and is supplied for information only. It has been produced following the
Chancellors Pre-Budget statement on the 9th and from statements
and notes issued by H.M. Treasury and HMRC.
F.H. Manning cannot accept responsibility for any errors or omissions
and Clients should not take any action without seeking further specific
advice.
|
