Closer alignment of disposal of assets could be foreshadowing future rules
The Chancellor, Philip Hammond announced the removal of capital gains indexation allowance from 1 January 2018. This will align the treatment of capital gains on assets with that for individuals and non-incorporated businesses. It removes for CGT the effect on inflation of an asset, such as a property.
“This closes the boundaries between personal and business taxation of assets,” said Ray Abercromby, partner at Smith & Williamson, the accountancy, investment management and tax group.
“However, it could also be seen as the beginning of an attack on assets held in companies. Recent buy-to-let reforms have resulted in a more commercial housing industry with many of the smaller holders leaving the market and larger holders incorporating.”
“The Chancellor may look at the difference in income tax rates and business tax rates and wonder why there is a difference. If he’s aligning the tax status of passive companies now, he may feel encouraged to look at further aligning taxation in the future.”
“As a result, the Chancellor may look to complicate the tax system further in the future by creating a distinction between passive companies and trading companies.”