In a letter to the Office of Tax Simplification, Sunak said that he wanted to see a review of the tax along with aspects of chargeable gains relating to individuals and small businesses.
He said that he wanted to make the system “fit for purpose” and improve the experience of those interacting with it.
Sunak’s letter said: “This review should identify opportunities relating to administrative and technical issues as well as areas where the present rules can distort behaviour or do not meet their policy intent.
“In particular, I would be interested in any proposals from the OTS on the regime of allowances, exemptions, reliefs and the treatment of losses within CGT, and the interactions of how gains are taxed compared to other types of income.”
The terms of the review will include consideration of the overall scope of the tax and rates, reliefs exemptions and allowances and the treatment of losses.
It will also consider the tax’s interaction with income tax, capital allowances, stamp taxes and inheritance tax.
Mike Hayes, a tax partner at accountancy firm Moore Kingston Smith, told the Financial Times: “The chancellor has not shown much enthusiasm for a wealth tax so far, but given that much of the population’s wealth is tied up in their homes, restricting the CGT exemption on a person’s home would enable him to tap into this vast source of wealth.”
In May, a report produced by the Resolution Foundation with London School of Economics and the University of Warwick found the highest CGT rate is 28%, compared to the 45% top rate of income tax.
Dr Andy Summers, assistant professor at the LSE, said: “Capital gains are taxed at much lower rates than regular income, but the legal line between these is very blurred.
“This means business managers have a big tax incentive to take their rewards as gains instead of salary or dividends.
“When we look at the types of gain going to people at the very top, that’s exactly what we find. A lot of capital gains are, in fact, just repackaged income going to the already-rich.”
In September last year, The Institute of Public Policy Research think tank said that bringing CGT in line with income tax could raise £90bn over five years.
However, a Treasury source yesterday told The Times: “It is standard practice to review taxes and CGT is one of the few taxes that has not yet been reviewed.”
“There is absolutely no expectation anything substantive will come out of this in terms of policy change. CGT reform is not in our sights.”
