Tories urge reform of capital gains tax

The Conservatives outlined plans for a radical shake-up of capital gains tax (CGT) yesterday, including the option of scrapping it altogether at a cost to the Exchequer of some £2bn.

The Conservatives outlined plans for a radical shake-up of capital gains tax (CGT) yesterday, including the option of scrapping it altogether at a cost to the Exchequer of some £2bn.

Oliver Letwin, the shadow Chancellor, claimed that successive changes made to CGT since Labour came to power had made the tax ever more complicated, meaning that the regime was now in urgent need of simplification.

The Tories have published three options for overhauling the CGT regime: complete abolition; a flat rate tax of 10 per cent on all assets; or a 10 per cent flat rate tax on all assets held for two years or more. The second option would cost about £1bn while the third would mean an £850m reduction in tax receipts.

Mr Letwin said: "Since 1998 the Government has changed the CGT rules in five ways, making the system ever more complicated.

"Its current structure distorts investment and has a negative effect on the economy. It discourages people from using capital in an enterpris- ing way."

The Conservatives have identified eight areas where the tax system is in need of reform because it is unfair or overly complex. These include council tax, inheritance tax, stamp duty and income tax and national insurance thresholds.

The party will today publish its proposals on inheritance tax, with one of the options being an increase in the threshold at which the tax begins to take account of the sharp increase in prop- erty values.