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Capital Taxes The annual exemption has been increased for 2003/04 to £7,900 (2002/03 £7,700) for individuals and to £3,950 (2002/03 £3,850) for most trusts. The rates of tax remain unchanged. Taper relief
The business assets rate of taper relief has been relaxed so that a wider range of assets will qualify. These provisions will apply to periods of ownership from, and disposals on or after, 6 April 2004. Asset sales
Where an asset is disposed of wholly or partly for a right to unascertainable deferred consideration the market value of the right at the time of disposal is included in the calculation of the chargeable gain arising on the disposal of the asset. Where the right is itself disposed of in a later tax year and a loss arises (by reference to the original market value of the right) the loss cannot normally be set off against the gain on the original asset. From 10 April 2003, it will be possible to set off such losses against the original gain made on the sale, subject to certain conditions. The main conditions are:
Reversal of rule on earn outs
For earn outs conferred up to 9 April 2003 the rule is that on application the earn out right will be treated for CGT purposes as a security, and in consequence any gain which would otherwise be treated as crystallising at the point of exchange will not do so. For earn outs conferred on or after 10 April 2003 the rule is reversed and treatment of the right as a security is automatic unless an election is made to the contrary. Share options
For options exercised on or after 10 April 2003 the method of computing chargeable gains or losses is restored to that which was generally thought to apply before the judgement in Mansworth v Jelley. Offshore trusts
Further anti-avoidance measures have been introduced regarding capital payments made by trustees of offshore trusts to UK resident and domiciled beneficiaries from 9 April 2003, to prevent payments avoiding the charge to CGT. Second-hand life insurance policies
It has been possible to dispose of a second-hand life insurance policy and generate either a tax free capital gain or a tax deductible capital loss. For disposals on or after 9 April 2003, any capital loss generated will be restricted to the amount of any real economic loss. Gains will only remain tax free in certain circumstances. Life insurance policies
From 9 April 2003, a number of tax anomalies and loopholes relating to life insurance policies have been ended. These remove tax charges on certain group life policies and policies held by charitable trusts and other persons. They also close loopholes in connection with policies held on trust and the misuse of the 5% withdrawal rules. UK-authorised collective investment funds
Changes which apply from 16 October 2002 will make it easier for foreign investors to receive interest from AUTs and OEICs gross and will remove a potential IHT charge. Treasury shares
Companies have previously had to cancel any of their own shares which they have repurchased. From a date to be announced, quoted and AIM companies will be able to retain rather than cancel any shares they repurchase, and (if they wish) resell them. Such shares are known as "treasury shares". Simplification of the 2004 tax return
With effect from the 2004 tax return (gains, year ended 5 April 2004) it will not be necessary to complete the capital gains pages of the self assessment tax return if the gains for the year, net of taper relief, do not exceed the annual exemption (£7,900 for 2003/04) unless either proceeds from non-exempt disposals in the year exceed four times the annual exemption or losses are set against the gains. The main change the Chancellor announced is an increase in the nil rate band to £255,000 (2002/03 £250,000)
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