As the UK economy continues to grapple with the deepest recession since records began, at the Chancellor’s request The Office of Tax Simplification (OTS) undertook a review earlier this year into Capital Gains Tax (CGT) identifying areas where the rules can be simplified and clarified.

This month, the OTS’ first report from its CGT review was released, and was met with a wave of mixed responses from professionals and press alike. With recommendations including aligning CGT rates with Income Tax; significantly reducing the annual exemption; and removing the CGT uplift on death for potentially all assets, it may come as little surprise that headlines focused on the huge potential tax bill many could face if the proposed changes are accepted.

If implemented, these recommendations would represent a major re-write of the CGT regime, in some cases increasing the effective tax rate from 10 percent to as high as 45 percent, with business and second home owners among those most likely to be affected – facing a significant tax bill indeed.

However, the report does recognise that positive incentives to help reward those who take investment risk are required. For example, the potential (re)introduction of a retirement-focused relief for the sale of business assets could replace Business Asset Disposal Relief. What tax incentives will there be for entrepreneurs?

The removal of the CGT uplift in base cost on death may mean that both Inheritance Tax (IHT) and CGT would be due on the same assets, held by an individual until death, and sold by a beneficiary thereafter. Perhaps a steer from the OTS to encourage individuals to consider gifting assets earlier on in life, all indicators suggest that now is the ideal time to review family finances and plan for CGT and IHT. Structuring business and family assets now and engaging in succession planning will save tax in future years.

Whilst the report states 'this review is focused on individuals’ liabilities and does not cover trusts or the ...