Where an asset has been used partly as a business asset and partly as a non-business asset throughout its period of ownership, or the last 10 years of its period of ownership, whichever is the shorter, the gain on the disposal of the asset will be apportioned pro rata. Part of the gain will qualify for the business asset taper over the whole period of ownership and the other part for the non-business asset taper over the whole period of ownership. There will be rules to address possible exploitation of the taper provisions. There will be a special rule for assets held by trustees where the settled property originates from a company. Capital gains tax is payable on gains realised by individuals, trustees and personal representatives of deceased persons.
Companies pay corporation tax on their capital gains.
Broadly, a capital gain is the excess of the sale proceeds of an asset over its acquisition cost, less a deduction for indexation allowance reflecting inflation. The indexation allowance is computed by uprating the cost of an asset by the change in the Retail Prices Index during the period of ownership of the asset. The structural changes now proposed are consistent with the Government's desire to encourage long-term investment, particularly entrepreneurial investment. Comments were invited on the reform of CGT in the Chancellor's Budget speech of 2 July 1997, followed by an Inland Revenue Press Release of 29 July 1997. Some 170 responses were received, displaying a wide range of opinion.