Capital gains tax

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Fundamentally, about 20% is the "right" rate for CGT. I mean, it feels right.

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I agree, that does sound just about correct.
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I would be interested to hear the contrary view though. Why is 10% the right rate and 18% the wrong rate?

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The contrary view is obvious. As others already pointed out, any Country (not only the UK) with high CGT takes the risk of not getting any CGT at all.
I've not yet seen a newco in a leveraged buyout established without taking into account all tax avoidance possibilities.
Considering your job, I'd be curious to hear your viewpoint on that.
 
Yeah but come on, a UK domiciled person cannot these days just set up an overseas trust and legally avoid CGT (while still keeping effective ownership of the money)
 
Mike there are 2 separate points: the tax rate, and the issue of whether taper should say so as to reduce the tax rate the longer you hold the asset.

These are purely personal views but I think 18% is an ok rate. The "80% rise" is emotive talk. Just as a matter of gut feel, 18% is the right rate on a gain, imho. I dont garee that folks will stop working hard becuase the rate is 18% instead of 10%, and if I were chancellor I'd be happy to have my bluff called on that

On the taper/long term thing, I'm glad it is abolished. I see no point in encouraging long term holding. I dont see anything wrong in start-up specialists starting businesses, then passing them on to folks who are good at growing businesses, who in turn pass them to specialists in bigger businesses, and so on. Why is it in the public interest for the same owner have to continue to own a business? There's nothing wrong with a quick buck imho

All very much imho. And I'm not pontificating here about other people's tax - like you, I also have pretty large sums invested in privately owned business (as well as non-business CGT assets)
 
Well, it's all ersonal opinion here, but everyone's retirement fund is reduced by tax, that's just tough. Keeping folks's retirement funds high isn't per se a reason to have low taxes

On the emigrate thing I agree with you, many will go offshore to avoid CGT. It's a fine balance for a chancellor becuase there shoudln't be such a high rate that most avoids it and collectiosn fall. But it is agianst that background that I think 18% is the right rate. Some will indeed go offshore, but others will stay. The UK has many attractions. Many cannot just retire, they are making serial gains and need to stay in the UK.

Just to put things in context by the way, in 2004-5 (latest year stats are available) there were just over 1million UK tax returns filed reporting gains of >£1million
 
Hi mapis. not sure I see your point. Sure, LBOs are designed to be tax efficient, but so are oldcos in old companies. Everyone is free to manage their affairs so as not to pay more tax than they need to, and I think that is perfectly fine.

I dont think there will be zero CGT collections with the 18% rate. Many folks like the UK and will stay here and just pay the tax. But they should be free to leave and not pay it, if they choose. To pay zero by emigrating you need to go for 5 years and go to Switzerland, one of the tax haven islands, Monaco, or somewhere like that. Apart from Monaco, i wouldn't want to live in any of those places and would prefer to pay 18%. It's entirely personal choice, but I think many (not all!) will do the same. It's kind of a psychological thing: I'm quite happy to pay 18% even though it is a very large absolute tax payment, whereas I'm not happy about paying 41% or some number like that
 
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Apart from Monaco, i wouldn't want to live in any of those places and would prefer to pay 18%

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Yeah, I wouldn't want to live there, either!... /forums/images/graemlins/grin.gif
You're maybe right after all, though also the UK climate is something I never found very attractive... but that's another story!
 
jfm/Deleted User

I do see Deleted User's point.
This change in CGT affects small family businesses.
Having taken advantage of taper relief over the last few years when we sold our small business, I can see that Deleted User is standing to pay a lot more CGT when he retires. There must be many like him and IMO that is wrong. It does nothing to encourage growth in the small business sector.

This is the main problem with this government since it has been in power. It cant see past its nose. All is wants to do is to find different ways of generating money to balance its books. Instead, the government should be looking at ways to porvide incentives and thus make more wealth for business in general - this, in turn then generates more income from taxes etc.....

By having an attitude of taxing those who CAN pay has no regard for "the big picture" and just demoralises everyone. In the last 10 years we have become one of the heaviest taxed countries in the world.

If I was still in business, I would be revising my long term strategy and looking at treating the business as a "cash cow" and milking it for everything - not an attitude for prosperity is it?
 
A lot of the posts are about what 'might' happen, I've already started to make changes in response to the tax increase.

I have kicked in contingency plans to sell a holding in medium sized company that I would not otherwise have sold. Sadly the withdrawl of my investments will mean that for a while (and hopefully only for a while) they will not have the funds to grow, which means no new jobs.

In the meantime we're looking at other investments that don't create jobs but which tax-wise benefit from the switch to a non-taper system.

I have no idea why, with the vast numbers employed by Government, they can't do even a modicum of scenario planning to work out what consequences there would be from the change.

As a slight aside, in the last few years the attempts to tax have risen, but the tax take has fallen short of expectations. When will they acknowledge the connection, long debated, that a vibrant economy (created in part by lower tax rates) leads to higher tax receipts?

There seems to be two mindsets. In one you believe the objective is to bake a bigger pie, thus everyone gets a bigger slice. The other approach is to simply appropriate a bigger share of the same sized pie, whether you helped bake it or not. Result is that future pies are smaller still. /forums/images/graemlins/frown.gif
 
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There seems to be two mindsets. In one you believe the objective is to bake a bigger pie, thus everyone gets a bigger slice. The other approach is to simply appropriate a bigger share of the same sized pie, whether you helped bake it or not. Result is that future pies are smaller still.

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How true that is!!
 
I think the government are tightening tax control to get every penny they can out of the system so that can waste it in spending huge sums on public services without proper control or management.

Any private industry board that had doubled its investment for little return like Mr. Brown has in the NHS would be sacked. But then Mr. Brown has had just the one aim of being PM since a kid and has never had to manage or create a business.

The extra £500 tax for those earning over £40k is just another way of him grabbing every penny he can without regard to the bigger picture.

I really do think that Mr. Brown has made a big mistake from his perspective in delaying the election. The spend, spend, spend has not and never will produce the value for money that is really needed from the public sector.

I really do believe that a low tax vibrant economy is not his vision - but mind you his vision has never actually been spelt out - if it has I must have missed it. He has obviously been too busy patting himself on the back for ‘managing; us through the foot and mouth, terrorist and other list of ill fortune that has beset us since he became PM but then nobody has actually explained just what management he did in those situations because if he wants to claim the credit for say cleaning up foot and mouth, the second part of which I accept he is an expert at, then he must also take the blame for causing it in the first place!
 
Unless I'm missing something, there's another aspect to the removal of taper (and previously indexation) relief - these were originally there to mitigate the effects of inflation - so if you have an asset with early gains, the 18% flat rate will encourage early disposal if slower future gains are anticipated?

Indeed, what happens with an asset appreciating around the same rate as inflation - its not really worth having, and then you get taxed on it at disposal??

There's something else not mentioned here yet - there was supposed to be an inviolate principle in tax law that changes were not to be retrospective (this lot have already breached that principle on other occasions) - so you could plan for the future. This one looks to me like it will have a retrospective effect on many...

On the topic of moving abroad to more favourable regimes - believe NZ has no CGT, and not sure why a move there would have to be for 5 years before disposal??


Has to be said though, CGT is currently overly complex, good advice is expensive and subjective, simplification has to been good in principle - but a 0% rate would be better (and no, that's not tongue in cheek - why should entrepreneurship and the creation of wealth be penalised??)
 
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On the topic of moving abroad to more favourable regimes - believe NZ has no CGT, and not sure why a move there would have to be for 5 years before disposal??


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My understanding is that you can dispose of an asset at any time after you become "non resident and not ordinarily resident", (a bit Catch 22 as the revenue can challenge this after you have made the disposal and claimed that you are not liable for the CGT - so it could be worth making a small disposal to test thier view, before making "the big one").

If you "become resident" again withing 5 years of becoming non resident, you would be liable for the tax.

My understanding is that, in Europe, Gibraltar, Monaco, Malta and Cyprus, are places where you can become resident and avoid UK CGT on the above basis.

My goal is to become a resident of Malta, make the disposals in Year 5, and remain non resident, (UK), and not ordinarily resident until the end of at least year 6..... by which time I may have no desire whatsoever to become a resident of the UK ever again.
 
OK, jfm, so you believe that flipping 20,000 M&S shares overnight is no less worthy than creating a business, employing people, paying other taxes along the way and creating wealth. Judging by the reaction of the media and the great 'n the good of the business world, your view is not shared by the majority
 
I got interested in "This moving abroard idea" and would have been very serious about it if SWMBO wasnt so firmly rooted here.

Anyway, for interest, I bought this download http://www.taxcafe.co.uk/tax-havens.html

Makes very interesting reading.

Its been awhile since I read it but it seems to me that the thing we have to watch out for is not to be caught like the Americans - apparently, they get caught for tax wherever they live. I believe that there is a move to do the same in the UK - Now that would create a long term "brain drain" IMO as people completely dissassociate themselves.
 
I also bought this from them:

http://www.taxcafe.co.uk/non-resident-offshore-tax.html

and asked them a specific question about my circumstances and plans, which I believe was answered in an excellent and comprehensive manner - it confrimed much of the advice I had already received, as well as giving 2 specific tips to help me "corner" the taxman into agreeing non residency, (and not ordinarily resident), prior to commiting to the big transaction.
 
Does the 18% rate also apply to residential property investments?

If so, that is a significant reduction as "we" did not benefit from taper relief to the same tune as "business assets".

I cant find anything to suggest that the 18% doesnt apply to residential investments, but I cant believe the Chancellor would have let that one get away.
 
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Does the 18% rate also apply to residential property investments?

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Yes, I think it does.

Strange isn't it, we had both types of investment - in companies and in property.

With company investments we took bigger risks and went in for the longer term, putting money into businesses and helping them grow. It helps everyone, and in the end, if it succeeds (and it sometimes doesn't) we got a 10% rate on assets held for a reasonable length of time. I'd agree it should have dropped to 0% eventually to encourage as much of that risk taking as possible.

The properties were not bought for gain, we simply felt it was right to house our elderly relatives (and thus took considerable cost away from the state). The change seems to mean, without any planning on our part, any gain will be at 18%, not at 40%. Completely arbitary, it seems we will be rewarded for taking little risk in something we would have done anyway that creates no wealth for the country.

This Government (and I suspect any career politician) would last 10mins in business, so long as they started with a large amount of money. Less than 10mins if not. /forums/images/graemlins/mad.gif
 
Captain
I used to have respect for your judgment but with what you have just written that respect has dropped a bit - you say ten minutes!!! A whole ten minutes? /forums/images/graemlins/smile.gif /forums/images/graemlins/smile.gif I reckon he would blow it within 5 minutes as soon as he uttered his first 'visionary' sentence it would be gone.

Mr Brown has only ever been a politician - all he has done has been aimed at getting to where he is now. On any performance criteria he would not have lasted amything like ten minutes even with a large sum of money!

He really thinks that he runs the country but in fact the country is run despite of him and his like by people who take risks and work hard and those attributes apply to all levels of income not just the top.

I am lucky - my asset disposal is happening before 1st April but again more by luck than judgement. A friend of mine with a string of rent a room houses can now realise his assets at less than half the old tax rate - no planning just the unstable, massive CGT changes that Mr. Brown feels he needs to make after 10 years!!!

So was he wrong before then?
 
OK. Well here is my theory. There is a way of avoiding CGT altogether. Ok it does cost a bit to do it. But it's been gaining ground fast, it uses EEC law, which countermands British law. It used to be only available to the super rich, but now, even I can do it.

If G Brown has got wind of this. He must have done after all, it's all above board and declared..

Reducing CGT makes it less advantageous to bother with the alternatives available, and what still gets round the system, will be made up by the loss of taper relieve and the raising of business tax.

I commend this to the forum. Basicly, he was bolloxed if he did not change the system.
 
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