The Chartered Institute of Taxation (CIOT) has called on the Government to consider delaying changes to capital gains tax rules in relation to home sales, to take account of the impact of COVID-19 on the property market.
The measure is included in the current Finance Bill, which will begins its committee stage in the House of Commons on Thursday 4 June.
Private Residence Relief (PRR) enables most owner occupiers to sell their properties without being liable for capital gains tax on any rise in their property’s value since the property was bought. The CIOT stated that final period exemption means that, under the law currently in place, people do not pay capital gains tax on gains made in the final 18 months of ownership, even if it was not their main residence during that period.
The Finance Bill aims to reduce that period, backdated to take effect from 6 April 2020, to the final nine months of ownership for most people – though the existing 36-month period for disabled people or those in a care home is retained.
The CIOT has indicated it is concerned that the evidence used by the Treasury for this reduction in the final period exemption arose before the current COVID-19 pandemic brought the property market to a near standstill. The Institute suggested its average selling time of approximately four and a half months may no longer be realistic.
Chair of the CIOT’s Property Taxes Committee, Marc Selby, commented: “We applaud the Government’s desire to better target a tax exemption – we think all reliefs should be regularly reviewed – but is now really the right time to be making this change to this relief?
“We are concerned that the original assumption of an average time of four and a half months for selling a property is out of touch with the reality of the property market today because of the impact of COVID-19.
“We strongly suggest that the original evidence base needs review and that consideration should be given to delaying the squeeze in the final period exemption until the impact of COVID-19 on the property market is better understood.”
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