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Annual exempt amount
The Government announced that the annual exemption for capital gains tax will be reduced for individuals and personal representatives from £12,300 to £6,000 from April 2023, and then to £3,000 from April 2024.
For most trustees, the annual exempt amount, which is currently £6,150, will reduce to £3,000 from April 2023 after which it will then halve again to £1,500 from April 2024.
No gain/no loss for couple who separate or divorce
Currently, the period of time during which divorcing/separating couples can transfer assets freely through the ‘no gain, no loss’ provisions, only lasts until the end of the tax year in which the couple has separated.
The Chancellor announced today an extension to this period to three years. Therefore, from 6 April 2023, this will allow spouses and civil partners who are in the process of separating to make 'no gain, no loss' transfers of assets between them for three years from the end of the tax year in which they cease to live together. Where the assets to be transferred are the subject of a formal divorce agreement, there is now an unlimited period to make these transfers and benefit from the 'no gain, no loss' rules.
In addition, the Government announced that for individuals who have transferred their interest in the former matrimonial home to their ex-spouse or civil partner and are entitled to receive a percentage of the proceeds when that home is eventually sold, will be able to apply the same tax treatment to those proceeds when received that applied when they transferred their original interest in the home to their ex-spouse or civil partner i.e. the ability to claim principal private residence relief.
Preventing avoidance through share exchanges
The Government has announced a new deeming provision will come into effect from 17 November 2022 in respect of securities in non-UK companies. The basis behind the new measure is to ensure UK resident and non-resident individuals are taxed on capital gains and distributions received where value has been built up in a UK business.
Where securities in a non-UK company are acquired in exchange for securities in a UK company, the company will be deemed to be located in the UK for capital gains tax purposes. What this means is that individuals will pay tax on gains or dividend/distribution income received in respect of those securities in the same way as if it were a UK resident company.
Those individuals affected will be those who hold more than 5% of shares and securities in a UK close company and exchange some or all of those securities for an equivalent holding of shares or securities in a non-UK company. It should also be noted that, in addition to the UK company being 'close', the non-UK company would need to be a close company if it were UK resident.
Employee share schemes and venture capital schemes
As previously announced, the Government is increasing the generosity and availability of the seed enterprise investment scheme (SEIS) and company share option plan (COSP).
The CSOP is a form of share incentive arrangement under which qualifying companies can grant tax-advantaged options to their employees.
The Chancellor has announced an increase in the employee option limit from £30,000 to £60,000 with effect from 6 April 2023, allowing qualifying companies to grant CSOP options to employees over shares with a market value of up to £60,000.
In addition to this, the SEIS has seen four key changes, being:
- An increase in the company lifetime limit from £150,000 to £250,000;
- An increase in the company qualifying trade age limit from two to three years;
- An increase in the company gross asset limit from £200,000 to £350,000; and
- An increase in the individual investor limits from £100,000 to £200,000.
These are due to come into effect from April 2023.
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