The Institute of Chartered Accountants in England and Wales (ICAEW) has stated that there is ‘no need’ to overhaul the current capital gains tax (CGT) regime.
In its response to a review of CGT carried out by the Office of Tax Simplification (OTS), the ICAEW concluded that ‘the scope and boundary of CGT is generally clear’, and that the tax ‘largely achieves’ its policy aim of discouraging schemes that attempt to convert income into a capital gain for tax purposes.
The Institute stated that some administrative and legislative improvements are possible. However, it also believes that alterations to the tax are unlikely to raise significant revenue without a major structural change to reliefs.
In regard to the different rates of CGT in use, the ICAEW found that the structure of rates is important for the tax as individuals will often be able to choose when to make disposals.
The ICAEW said: ‘The current rates are intended to reflect the fact that following the removal of indexation and taper relief for individuals, the calculation of gains does not take into account the length of time an asset has been held or inflation; this is the policy basis for CGT rates being lower than the income tax rate.
‘The extent to which CGT should be payable on gains arising from inflation and how it should be mitigated is a policy matter for government and parliament to determine.’