Do Capital Gains Tax changes break European law?

Just days after the Chancellor announced his latest Capital Gains Tax changes, a leading accountancy body has raised doubts over the legality of the proposed implementation process.

The Institute of Chartered Accountants of Scotland (ICAS) points out that European law asserts that changes to tax legislation must provide taxpayers a reasonable period of time to assert their right to claim reliefs.

That right will be denied under the new CGT rules just outlined by the Chancellor.

Previous legal decisions indicate that a transitional period of 90 days, more than the time period proposed in the recent change to Capital Gains Tax, is insufficient, according to the tax body.

ICAS Director of Taxation, Derek Allen said, “Taxpayers now have less than 10 weeks to rearrange their assets and, if necessary, try to arrange a disposal to protect some of the indexation relief which may have accrued because of inflation between 1982 and 1998. It is wrong to tax inflationary gains and it would be contrary to European Law to deny taxpayers sufficient transitional time to rearrange their affairs before the new legislation is enacted.”

“It would be irresponsible to enact complex changes and not give a sufficient transitional period for taxpayers to consider the implications and arrange their affairs properly. At the very least, the Chancellor should defer the implementation of this legislation for up to 2 years. If this is not possible, he should still allow taxpayers who owned assets at 6 October 2007 a period of up to 2 years to sell those assets and gain the benefit of indexation allowance.”