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CGT proposals: selective simplification

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22nd Aug 2012
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Proposed changes to capital gains rules for companies may be too narrow and amount to "selective simplification", according to Baker Tilly.

HMRC recently started a consultation on plans to simplify rules on chargeable gains rules for companies who use a currency other than sterling for accounts purposes, as promised in Budget 2012.

Currently, companies that use a currency other than sterling for accounting purposes must translate amounts into sterling for chargeable gains purposes. This means that chargeable gains and allowable losses can include amounts attributable to currency exchange movements against sterling even where there is no underlying economic gain or loss to the company.

This increases paperwork for these companies, which the new rules seek to remove.

Since 2009, tax rules for chargeable gains have been made simpler, but the government thinks they can be made simpler. It is considering whether companies with a non-sterling “functional currency” should continue to be required to compute their chargeable gains and allowable losses in sterling.

Baker Tilly said that the current proposals are a “step in the right direction” and are likely to be welcomed by many multinationals the proposals are narrowly targeted because they only apply to the disposals of shares. 

This means that any other chargeable disposals will still need to be calculated under the old rules. 

“Such a narrow application seems a little odd and will leave many companies wondering whether this is true simplification or a measure designed to benefit a select few,” Baker Tilly said.

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