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BUDGET 2008 NEWS |
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Capital gains tax Reform and entrepreneurs relief See TM ¶5220 The changes announced to the CGT regime at the Pre-Budget and earlier this year have been confirmed as being included in Finance Bill 2008. Further details were given on the treatment of deferred gains under the new relief. Where qualifying corporate bonds are received post 6 April 2008 in return for shares that would have qualified for the relief the relief will apply to reduce the postponed gain and can be claimed at any time up to the disposal of the bonds. These rules will apply equally to gains deferred under the Enterprise Investment Scheme. There will also be an option to disapply the usual rules on “paper for paper” transactions where the taxpayer can elect to be taxed at the time of the exchange and claim the relief.
For disposals prior to 5 April 2008 where gains have been deferred that become chargeable post 6 April 2008 the relief will be available if the original disposal would have qualified.
A number of examples have been published by HMRC to illustrate the method of applying the legislation. These show a series of straightforward cases including the provisions stated above.
While the new relief has placated the fears of many business owners the biggest losers will be those with options under the Enterprise Management Incentive scheme. Under the regulations as they stand it is unlikely that the employees concerned would have a sufficiently long period of ownership of the resulting shares or a sufficiently large stake in the company to qualify. The reduced rate of tax on such shares under the taper relief regime was one of the largest attractions of the scheme with the ownership period accruing at the date of grant of the option without any financial commitment by the employee.
Base cost of inherited assets See TM ¶5592 Where a legatee acquires an asset from a deceased’s estate this is deemed to be acquired at market value. Where the estate was subject to inheritance tax this value will have been “ascertained” and it is this value that is to be used as the market value. With the ability to transfer the nil rate band for inheritance tax the asset’s value may be ascertained at a later point in time. For instance upon the death of the husband all of his estate may pass to his wife and as such no value is ascertained. However on the wife’s death the value of the asset will need to be agreed in order to work out the amount of nil rate band that is available for transfer. A change to the existing legislation will be introduced to ensure that this value will not require to be used for CGT purposes.
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