ShareSoc Director Cliff Weight has written an opinion piece, which the FT published on 11th January (requires subscription to view). Cliff argues that Capital gains tax (CGT) is hideously complex and needs to be simplified. This is even more urgent as the reduction of the CGT threshold from £12,300 to £6,000 and then £3,000 will draw many more into the net of those having to complete CGT returns.
Long term shareholders of companies, where there have been rights issues, consolidations, capital repayments, demergers and splits require detailed record keeping and the FT article highlights this example:
A UK investor – let’s call her Sue – inherited some shares in aerospace group Flight Refuelling when her father died in 1985. Later, in 2004, her mother passed away and she inherited more stock in the company, which had been renamed Cobham in 1994.
When the group was taken over in the 2019-20 tax year, she needed to work out her capital gains and the tax she owed. A straightforward exercise? Anything but.
After rights issues and consolidations during her period of ownership, all of which affect the calculation of CGT, Sue found herself ensnared in complexity.
Hers is not an uncommon experience for private investors engaging with the CGT regime. Onerous, baffling and unfit for purpose, the rules are in desperate need of updating and reform.
Cliff also highlights another problem is the base cost. For assets owned before 1982, investors must take the market value at March 31 1982 as the “base year” when calculating CGT. Keeping records that go that far back is challenging – and particularly difficult for executors of those who have died.
Recently, Lord Lee asked a Parliamentary Question about CGT, see https://www.sharesoc.org/sharesoc-news/lord-lee-asks-parliamentary-question-about-capital-gains-tax/
ShareSoc will now be writing to the Minister asking to meet to discuss our ideas.
This is a ShareSoc News item published on 11/01/2023