Planned UK Tax On Pre-Owned Assets Problematic, Say Accountants

by Robin Pilgrim, LawAndTax-News.com, London

02 November 2004

In a joint submission made in response to the UK government's consultation on the proposed taxation of 'pre-owned' assets from April 2005, the Chartered Institute of Taxation (CIOT) and the Institute of Chartered Accountants in England and Wales (ICAEW) have slammed the proposed regime.

Schedule 15 of the 2004 Finance Act provided for an income tax on the benefits that people enjoy when they have arranged free continuing use of major capital assets that they once owned. The government launched a consultation on the proposals in August (set to end on November 18), and plans to introduce the new rules at the start of the 2005 fiscal year.

However, in their submission, the CIOT and the ICAEW argued that the new regime would be "retrospective in its effect, disproportionate to the mischief at which it is purportedly aimed, contrary to taxpayers' legitimate expectations, and arbitrary as based on unquantifiable concepts".

The industry bodies additionally called for comment on the implications of the new rules for equity release schemes, pointing to the government's failure to protect sales of part of an asset in the exemptions section of the planned legislation.

Speaking to the AccountingWeb news service last week, an Inland Revenue spokesman attempted to clarify the situation, explaining that:

"There is no question of legitimate equity release schemes that are not about avoiding tax being targeted by this legislation."

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