APCIMS Publishes Pre-Budget Submission

by Jason Gorringe, Tax-News.com, London

22 August 2008

In a pre-budget submission to the Treasury this week, the Association of Private Client Investment Managers and Stockbrokers (APCIMS) called on the UK Government to build on its simplification of Capital Gains Tax (CGT) in order to stop penalising long term share ownership.

To this end, APCIMS called on the Government to move the base date and cost value for securities held prior to 1998 for the computation of Capital Gains Tax.

The Association explained that:

"Indexation allowance used to apply to assets that were acquired before April 1998. In some circumstances this significantly reduced the gain arising on a disposal by taking inflationary increases into account."

"The changes in the 2008 Finance Bill simplified Capital Gains Tax by ending taper relief and indexation allowance and introducing a new single rate of 18%. Shares purchased between March 1982 and April 1998 no longer benefit from the indexation allowance (for which there was a rate for each month in that period). As a result shareholders who have held shares for a long time are being unfairly penalised."

It continued:

"The abolition of any accrued RPI indexation allowance in the 2008 Finance Act has retrospectively made purely inflationary gains between 1982 and 1998 liable to CGT. These “gains” (illusory in real terms) were previously not taxed under any of the various CGT regimes operating during the past 25 years."

"In order to address this and in keeping with the Government’s CGT simplification agenda, APCIMS is calling on the Government to introduce a further reform to move the base date from when gains are computed from 1982 to the value of the shares in March 1998. This would allow long term investors to uplift their cost base, some of which is purely inflationary gains. It would also overcome the problem of how far back a client’s records need to be kept and the various CGT identification rules that were in place in the first half of the 1980s."

The key changes recommended by APCIMS in its pre-budget submission are to:

• Reduce the rate of Stamp Duty/SDRT on chargeable securities to 0.25%;
• Abolish the rule that requires an intermediary when acting in a principal capacity to treat commission as part of the consideration on which SDRT is charged;
• For holdings held prior to 1998, update the acquisition date to this date and update cost to that value at this date for computation of Capital Gains Tax to 1998, as happened as at 1982;
• Issue a clarification in respect of uninvested cash in a Stocks & Shares ISA;
• Review the requirement to undertake Quarter-up Valuations under existing full rules;
• Introduce incentives to encourage those on lower incomes to invest in pension schemes; and
• Relax the rules on non-domiciles relating to UK situs assets.

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