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TODAY'S OTHER NEWS

Delay property tax change until market revives, experts tell government

A taxation institute is urging the government to delay Capital Gains Tax changes relating to housing transactions until the virus crisis ends.

The Chartered Institute of Taxation says the controversial measure about which it is concerned is in the current Finance Bill, which begins its committee stage in the House of Commons tomorrow.

Private Residence Relief enables most owner occupiers to sell their properties without being liable for CGT on any rise in their property’s value since they bought it. 

Final period exemption means that - under the law currently in place - people do not pay CGT on gains made in the final 18 months of ownership, even if it was not their main residence during that period. 

However, the Finance Bill aims to reduce that period (backdated to take effect from April 6 this year) to the final nine months of ownership for most people, with the exception of disabled persons or those in care homes.

The institute says it’s concerned that the evidence used by the Treasury for this reduction in the final period exemption arose before the Coronavirus crisis brought the housing market to a near standstill. 

The Treasury has suggested an average selling time of approximately four and a half months – but the institute says this may no longer be realistic for properties in the process of being transacted, having been delayed by the virus crisis.

“We applaud the government’s desire to better target a tax exemption – we think all reliefs should be regularly and consultatively reviewed - but is now really the right time to be making this change to this relief?” asks Marc Selby, who chair’s the institute’s Property Taxes Committee.

“We’re concerned that the original assumption of an average time of four and a half months for selling a property is out of touch with the reality of the property market today because of the impact of COVID-19. We strongly suggest that the original evidence base needs review and that consideration should be given to delaying the squeeze in the final period exemption until the impact of COVID-19 on the property market is better understood” he adds.

The institute says it is a significant possibility that the market will remain slow for some time, with houses taking much longer to sell than expected at the time of the consultation, leaving some sellers with an unexpected tax liability because it takes longer than nine months to sell.

“Many homeowners who are trying to sell a former home may not be aware of the reduction to nine months. If this change goes ahead now, the new rules must be better communicated” adds Selby. 

“Their introduction coincides with the new 30-day time limit running from the date of completion to report and pay CGT. 

"The reduction in the final period of ownership exemption from 18 months to nine months combined with a 30 day time limit for reporting and paying tax on residential property gains means that the realisation of a chargeable gain is much more likely, particularly as the property market revives, and there is now much less time to establish CGT liability and pay the tax due.”

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