Rishi Sunak orders capital gains tax review as Treasury faces spiralling coronavirus bill
Rishi Sunak has ordered a review of capital gains tax as the Treasury grapples with a soaring bill for tackling the coronavirus pandemic.
The Chancellor has asked the Office for Tax Simplification (OTS) to look at the levy, which kicks in when assets that have increased in value are sold.
Sunak, who will be grilled by MPs on the Treasury Committee on Wednesday afternoon, has asked the body to look at whether the current rates are “fit for purpose”.
In a letter to the OTS, Sunak says: “I would like this review to identify and offer advice about opportunities to simplify the taxation of chargeable gains, to ensure the system is fit for purpose and makes the experience of those who interact with it as smooth as possible, as set out in the agreed terms of reference.”
He added: “This review should identify opportunities relating to administrative and technical issues as well as areas where the present rules can distort behaviour or do not meet their policy intent.
“In particular, I would be interested in any proposals from the OTS on the regime of allowances, exemptions, reliefs and the treatment of losses within CGT, and the interactions of how gains are taxed compared to other types of income.”
A Treasury source downplayed the likely impact of the review, telling The Times: “It is standard practice to review taxes and CGT is one of the few taxes that has not yet been reviewed.”
They added: “There is absolutely no expectation anything substantive will come out of this in terms of policy change. CGT reform is not in our sights.”
But the move comes as the finance ministry contends with the spiralling cost of measures to soften the economic impact of the response to the coronavirus pandemic.
According to the latest assessment from the Office for Budget Responsibility, the Government is set to spend £192bn on measures to fight the virus — up from the previous estimate of £132.5bn last month.
The new figure includes both measures announced by the Chancellor in June, which come to £142bn, and those announced in his Summer Economic Update last week, which the OBR predicts will cost the Treasury £50bn.
Meanwhile the OBR has predicted that UK GDP will tumble by at least 10.6 per cent in 2020, its worst decline in 300 years.