All of the major political parties’ election manifestos were published with tax policy playing as much of a key role as it certainly ever has done in my career in tax.
A fantastic overview of all of the tax proposals was prepared by the Chartered Institute of Taxation (CIOT), and can be found here.
One significant talking point has been capital gains tax, and specifically the future of capital gains Entrepreneurs’ Relief.
Broadly, Entrepreneurs’ Relief (ER) provides a 10% capital gains tax rate on capital gains realised on qualifying assets. For a residential property qualifying asset, the relief can be worth a very significant 18% (being the difference between the 28% highest capital gains tax rate for gains realised on residential property). For any other asset, the value can be as much as 10% (being the difference between the 20% capital gains tax rate for gains realised from other chargeable assets).
For a detailed overview of ER, please read through the briefing note on our website.
It is widely thought in the tax profession that there is a strong possibility that ER will be abolished by the government.
Prior to the election parade starting, there had been calls to abolish the relief. In August 2018, the Resolution Foundation called for the abolition of the relief. More recently (in late October 2019), the Institute for Fiscal Studies (IFS) seriously questioned the rationale of the relief, and in early November 2019, Sir Edward Troup (former HMRC Permanent Secretary) called for the abolishment of the relief off of the back of the IFS report.
These recent calls for the scrappage of the relief, and the tide of public opinion against austerity and the wish for increased investment into public services has meant that the scrappage of the relief is likely under any government in 2020. The Conservatives have promised to ‘review and reform’ the relief. It is difficult to see how the scope of the relief could be restricted in any way of note, other than reducing the lifetime limit (currently £10m per individual).
I think that there is a significant risk of the ER being abolished and potentially as early as from the date of the next Budget – which is likely to be in January or February, with the Conservatives having promised to deliver a Budget in the first 100 days post-election.
Those with qualifying assets standing at a significant gain, and particularly those with furnished holiday let properties standing at a significant gain (given the very significant tax saving of 18%), and value the availability of ER should consider getting in touch to discuss planning to crystallise the benefit of the relief now.
This publication has been prepared by RRL LLP. It is to be treated as a general guide only and is not intended to be a comprehensive statement of the law or represent specific advice. No liability is accepted for the opinions it contains, or for any errors or omissions. All rights reserved.