Capital Gains Tax
Rate
The rate of capital gains tax (CGT) for individuals will remain at 28% for gains, or any parts of gains, which taken together with the individual’s income for the year exceed the upper limit for payment of basic rate income tax (higher rate taxpayers).
The rate of CGT will remain at 18% for individuals whose total income and gains are less than the upper limit for payment of basic rate income tax (basic rate taxpayers).
The rate of CGT for trustees and personal representatives will remain at 28%.
The annual exempt amount for capital gains tax will increase to £10,600 with effect from 6 April 2011.
For details of rates and thresholds applicable in 2011/12, please click here to see tables.
Annual allowance 2011-12
The Capital Gains Tax annual exemption will increase in line with indexation to £10,600 for the 2011/12 tax year. The exemption for trustees will be £5,300.
Annual allowance 2012-13
From April 2012 the Capital Gains Tax annual exemption will be increased each year in line with the Consumer Prices Index (CPI) instead of the Retail Prices Index (RPI). Automatic indexation calculated by reference to the CPI will be overridden if Parliament determines a different amount should apply.
Entrepreneurs’ relief
For disposals on or after 6 April 2011 the lifetime limit on qualifying capital gains will increase from £5m to £10m.
There are no other changes to the conditions applying to this relief.
Companies - losses after an ownership change
From Royal Assent of the Finance Bill 2011 the rules that restrict the set-off of capital losses following a change of company ownership will be simplified.
The result of the simplification will be that capital losses realised prior to the change in ownership can be off-set against the following:
- Capital gains on assets acquired prior to the change in ownership.
- Capital gains on assets used in the same business the company carried on prior to the change in ownership.
The restrictions that the business had to be a trade, and had to be carried on by the same company, have been removed.
Companies - value shifting
From Royal Assent the value shifting rules that apply to companies will be simplified.
The simplification will result in a new targeted anti-avoidance rule, to replace the existing legislation, which will apply where tax-driven arrangements are entered into to reduce the value of a company, for example by payment of a dividend, before a sale of its shares subject to corporation tax on chargeable gains.
Companies - degrouping
From Royal Assent the rules applying to groups of companies for the calculation of degrouping charges will be amended.
The result of the amendments will be:
- The degrouping charge will be treated as additional consideration for the disposal of the shares, rather than as a standalone charge on the company being disposed of. This will ensure that any reliefs available to the shareholder, primarily the substantial shareholding exemption (SSE), will apply to the degrouping charge.
- The ability to make a claim to reduce the charge where it is just and reasonable to avoid taxing the same gain twice.
- Clarification of the circumstances when the associated companies’ exception applies (see below).
- Repeal of the ability to roll-over a degrouping charge.
The amendments to the rules on the degrouping charge will include clarification of the associated companies’ exception to make it clear that the degrouping charge cannot be avoided by the insertion of artificial intermediate stages to benefit from the exception.
Single payment scheme
Entitlements under the EU single payment scheme (SPS) are intended to be qualifying assets for business asset roll-over relief. The EU directive under which the entitlement arises varies over time. To avoid amending the tax legislation for new EU directives, the Finance Bill 2012 will include legislation to ensure that entitlements under the SPS will be qualifying assets no matter what directive they fall under.
