Rishi Sunak has been instructed to remove a loophole that allows people to avoid paying inheritance and capital gains taxes.
As many people fear wealth tax reforms, RISHI SUNAK was informed that there are ways to avoid paying inheritance tax and capital gains tax.
HM Revenue & Customs collected record sums of capital gains tax in the 2019-2020 tax year, as analysts projected the figure would continue to increase. Last fiscal year, the government received £9.9 billion from the wealth levy, a three percent increase. Despite the fact that the number of persons paying the tax has decreased by 6% to 265,000, the number of people actually paying the tax has increased.
The majority of capital gains tax revenue comes from a tiny group of high-income people.
Those who achieved gains of £5 million or more paid 41% of capital gains tax in 2019-20, but accounting for fewer than 1% of the levy’s taxpayers.
However, Bill Dodwell of the Office of Tax Simplification warned in July on the FT Adviser podcast that many people are still finding ways to avoid paying both inheritance tax and wealth tax.
“One of the challenges facing the tax system is how neutral it should be,” he remarked. There is already a penalty against an individual transferring assets away during their lifetime to children, for example, because this can result in a capital gains tax burden in certain situations.
“So many people in that situation keep the asset until they die, and then their successors inherit it at market value for capital gains tax purposes at the time of death, rather than at the original cost.
“In some situations, particularly when dealing with business assets, this can result in a twofold advantage, as you may end up paying no inheritance tax due to the exemption.
“And the beneficiary receives the market value base cost, allowing them to sell the asset right away and without paying any taxes.
“We brought it up because it appears to be at odds with the policy goal, which is to allow assets to transfer from one generation to the next and be held rather being sold immediately.”
In November, the Chancellor commissioned a research from the Office of Tax Simplification, which proposed that wealth taxes, including capital gains, may be used to recuperate revenues.
Following the publication of the report, Mr. Dodwell advised that capital gains be linked with. “Brinkwire News in Condensed Form.”