Capital gains tax: transfers of assets between separating spouses and civil partners
In its second capital gains tax report (CGT) Simplifying practical, technical and administrative issues, the Office of Tax Simplification (OTS) recommended that HMRC should extend the “no gain no loss” window that currently ends at the end of the tax year of separation. The draft legislation goes slightly further than the OTS recommendation. It provides that:
- separating spouses or civil partners will be given up to three years after the year they cease to live together in which to make no gain or no loss transfers;
- no gain or no loss treatment will also apply to assets that separating spouses or civil partners transfer between themselves as part of a formal divorce agreement
- a spouse or civil partner who retains an interest in the former matrimonial home will be given an option to claim private residence relief when it is sold; and
- some individuals who transfer their interest in the former matrimonial home to their ex-spouse or civil partner are entitled to receive a percentage of the proceeds when that home is eventually sold. They will be able to apply the same tax treatment that applied when they transferred their original interest in the home to their ex-spouse or civil partner to the proceeds received on the eventual sale.
These changes are set to apply to disposals on or after 6 April 2023.
Draft legislation on CGT: disposals of land and residences for limited liability partnerships and Scottish partnerships extends CGT relief on an exchange of interest in land or private residences held, prior to the disposal, by the partnership to members in limited liability partnerships and partners in Scottish partnerships. This corrects an unintended anomaly, which meant that private residence relief and rollover relief was only available to English partnerships. It will apply to disposals made on or after the Budget Day in 2022, (ie, from a future date).
The government had previously announced that it would introduce top-up payments to individuals who save into an occupational pension under net pay arrangements if their total taxable income is below the personal allowance. It has now published the draft legislation Low earners anomaly: pensions relief relating to net pay arrangements to implement this from 2025/26 in respect of contributions made in 2024/25.
Pension assets: further tax provisions for income tax and inheritance tax in connection with the dormant assets scheme introduces changes to make sure that dormant assets transferred to the reclaim fund which are subsequently returned, receive the correct tax treatment. It will have effect from Royal Assent.
Pension schemes: amendment to taxation of collective money purchase schemes ensures that payments of periodic income will be considered authorised pension payments when made from a collective money purchase pension scheme that is in the process of being wound up. It also clarifies that where funds used to pay that pension are transferred, they can provide drawdown pension. The changes will be effective from 6 April 2023.
Homes for Ukraine Sponsorship Scheme: tax exemptions and reliefs introduces temporary tax reliefs and exemptions in connection with the Homes for Ukraine Sponsorship Scheme for the 15% rate of stamp duty land tax, the annual tax on enveloped dwellings, income tax, and corporation tax.
Please send comments on the draft legislation for these measures to email@example.com.
HMRC data collection
The consultation document Improving the data HMRC collects from its customers could have significant ramifications for individuals, employers and businesses.
The consultation puts forward a number of potential options for how HMRC collects, uses and shares data across government. The primary focus is on data collected directly from taxpayers, but HMRC will also continue to look at the data it already collects, or might collect, from third parties.
These are the options:
- the business sector of the self-employed;
- the occupations of employees and the self-employed;
- the location(s) of an employment or a business;
- the number of hours employees work;
- dividends paid to shareholders in owner-managed businesses; and
- the start and end dates of self-employment (this data is already collected but not reliably so). In the context of Making Tax Digital for income tax self assessment (ITSA) it is slightly odd that start and end dates for income from property are not also on the list.
The consultation states that HMRC proposes to legislate for any changes in the Finance Bill 2023/24 at the earliest.
Concerns are likely to centre around the administration burden (particularly for employers given the items listed), data security, mission creep, and the risks associated with sharing of data across government departments.
Please send comments to firstname.lastname@example.org as soon as possible, but by 12 September latest, to allow them to be considered for inclusion in ICAEW’s response.
Finally, the faculty can report a small success. The government will not, at this stage, proceed with the ideas set out in the call for evidence to change the timing of the current obligation for ITSA taxpayers to notify liability. Instead, alternative options for change as suggested by ICAEW and others will be explored. The Tax Faculty welcomes that HMRC has listened to the feedback received and looks forward to working with HMRC as it develops policy in this area.
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