It is well known that the Chancellor is targeting changes to the UK capital gains tax (‘CGT’) regime. He tasked the “Office of Tax Simplification” to review the UK CGT regime last year, and numerous recommendations have since been put forward to the Chancellor for its modification.
The most important recommendation is to more closely align the UK CGT rates (currently up to 20% / 28%) with UK income tax rates (currently up to 45%). Whether any rise in UK CGT rates would be introduced gradually, or in a single jump, remains to be seen (if done in a single jump, it is likely that this would be delayed until at least 2022 to allow individuals to plan accordingly – which could stimulate economic activity as investors seek to realise gains before the rate rise).
Such an increase to CGT rates would raise some interesting questions, for example:
- Would any changes be made to the UK reporting fund regime? If not, would non-reporting funds no longer be so unattractive for UK investors?
- Would UK investors become more interested in investing in structured products issued by Swiss banks (which have historically been largely unattractive to UK residents due to the adverse ‘DDS’ classification)?
- Would the ownership of residential property in the UK become less attractive for non-residents? What would the impact be on Swiss residents who own UK property considering a sale? How would this affect foreign collective investment schemes and trusts that hold UK property?