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| CGT double whammy for UK Government |
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A capital gains tax (CGT) double whammy is coming the Government’s way because receipts are due to decline steeply according to the Association of Chartered Certified Accountants (ACCA). ACCA Head of Taxation Roy-Chowdhury explains: “The double-hit will come from a slow down in the rental and purchase of second properties and in securities trading. The decline in mortgage lending and the aftershocks of Bradford and Bingley’s demise as a popular mortgage lender for buy-to-lets will also have an accumulative affect on the amount of money heading to the Government’s coffers. “Also capital gains receipts from shares will decrease because there is a fall in share prices. The market will again push down the level of capital gains tax which people pay to the taxman. “Overall, even if the stock market begins to rally, ACCA suspects there will be sharp declines in the amount of CGT which goes to the Exchequer over at least the next year.” ACCA believes that Income Tax receipts in relation to these sources will also dwindle – first with the level of rental income declining, both from a general downward trend in the property lending market but also with the cost of mortgages for second properties increasing. Secondly, there will be a decline in income tax payments as business’ profitability reduces and the level of dividends lessens – this means less income tax is payable. Chas Roy-Chowdhury concludes: “The tax rules on buy-to-let have been profitable for Government and for landlords alike, and the same can be said for the taxation of investment in shares, so long as the market was buoyant. Both have normally generated significant levels of chargeable gains for the Exchequer if a property or shares were worth more than when paid for or when they were sold. However, the first £9,600 of total taxable gains are tax free (tax year 2008-2009). But the tables have now turned with capital losses likely to become the norm. We now wonder how much of the £5 billion revenue could be lost because of current market difficulties?” Link
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About The Author  Sarah Laing Sarah is a Chartered Tax Adviser. She has been writing professionally since joining CCH Editions in 1998 as a Senior Technical Editor, contributing to a range of highly regarded publications including the British Tax Reporter, Taxes - The Weekly Tax News, the Red & Green legislation volumes, Hardman's, International Tax Agreements and many others. She became Publishing Manager for the tax and accounting portfolio in 2001 and later went on to help run CCH Seminars (including ABG Courses and Conferences). Sarah originally worked for the Inland Revenue in Newbury and Swindon Tax Offices, before moving out into practice in 1991. She has worked for both small and Big 5 firms. She now works as a freelance author providing technical writing services for the tax and accountancy profession. |
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Article Added Monday, 27 October 2008 | 1672 Hits |
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