Introduce a Flat Rate of CGT to Create Movement in Property Market, Says Accountant
The Government should introduce a flat rate of Capital Gains Tax (CGT) and remove the exclusion for residential property, to create more movement in the property market, insists London chartered accountant Blick Rothenberg LLP.
In recent months, Conservative MP Kevin Hollinrake proposed a reduction in the rate of CGT paid by landlords when they sell their properties to sitting tenants.
Earlier in the year, the former chancellor, George Osborne, cut the main rate of CGT from 28% to 20% in the last Budget. However, the rate reduction specifically excluded any capital gains from residential property.
A partner at Blick Rothenberg, Nimesh Shah, says: “Hollinrake’s proposal theoretically makes sense, as it encourages landlords to sell their property to the tenant, in return for a tax rate reduction. However, this would add yet another unnecessary provision to the current CGT and residential property tax regime, which has seen a raft of changes over the last five years.
“It is not clear how this provision would work in practice, but it will more than likely involve specific anti-avoidance provisions so that the relief is not abused. For example, by selling the property to a family member who is a tenant of the property.”
Shah suggests: “A better proposal would be to simply have a flat rate of CGT and remove the exclusion for gains on residential property. With the forthcoming changes to mortgage interest relief restriction for buy-to-let landlords (taking effect from 6th April 2017), individual owners of residential property are looking at ways to exit their investments, but many are being put off by the higher rate of CGT.
“The Government has said on numerous recent occasions that it wants to create more movement in the UK’s housing market, and aligning the CGT rate would serve to do just that, as well as simplifying the CGT rules in an already complicated tax system.”
Landlords, do you believe that a flat rate of CGT would create more movement in the property market?