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CAPITAL TAXES
CAPITAL GAINS TAX (CGT)
The annual exemption for 2000/01 has been increased to £7,200 for individuals and to £3,600 for most trusts.
RATE OF TAX
From 6 April 2000 gains in excess of the annual exempt amount are added to savings income and charged at 10, 20 or 40 per cent as appropriate.
BUSINESS ASSETS
There are significant improvements to the taper relief rules for disposals of business assets after 5 April 2000.
The following shareholdings will now qualify:
 | all shareholdings held by full and part time employees in unquoted trading companies (including AIM shares),
| all shareholdings held by employees in quoted trading companies,
| shareholdings in a quoted trading company where the holder is not an employee but can exercise at least 5 per cent of the voting rights.
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A new 4 year business asset taper will apply from 6 April 1998 with the existing 'bonus' year for business assets held at 17 March 1998 being withdrawn.
| Period asset held (years) |
Percentage of gain chargeable |
Effective rate for higher rate CGT taxpayer |
| 0-1 |
100 |
40 |
| 1-2 |
87.5 |
35 |
| 2-3 |
75 |
30 |
| 3-4 |
50 |
20 |
| >4 |
25 |
10 |
The taper relief rules for non business assets remain unchanged.
ANTI AVOIDANCE MEASURES
The Chancellor announced new measures effective from Budget Day to target sophisticated tax avoidance schemes using trusts. Briefly,
| the disposal of an interest for consideration in a settlor interest trust will cause a deemed disposal and reacquisition at their market value of the assets to which the interest relates,
| if an interest is acquired in a trust for consideration any losses accruing to trustees will not be available to offset gains on assets which have been transferred into the trust using holdover relief,
| for certain trusts there will be a disposal and reacquisition of settled property if trustees transfer funds to another person at a time when they are in debt and any borrowed money has not been wholly used for normal trust purposes,
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| if trustees become non resident at a time when there are unattributed gains from a previous non resident period there will be no uplift in value of any beneficial interest in the trust,
| use of double tax treaties to avoid gains of offshore companies being attributed to trustees is to be prevented.
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TAX TIP
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If you are considering accelerating your retirement to make the most of CGT retirement relief, don’t forget to consider the alternative of maximising taper relief.
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INHERITANCE TAX (IHT)
The nil rate band has been increased by £3,000 to £234,000 with effect from 6 April 2000. The rates of tax remain unchanged.
There were no changes to the rates of business or agricultural property relief. Potentially exempt transfers and deeds of variation were also unaffected.
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