Month: November 2020

Green Industrial Revolution – trees to the rescue!

Boris Johnson has today outlined his Ten Point Plan for a Green Industrial Revolution to support up to 250,000 new jobs.

The 10 points are:

  1. Offshore wind: Producing enough offshore wind to power every home, quadrupling how much we produce to 40GW by 2030, supporting up to 60,000 jobs.
  2. Hydrogen: Working with industry aiming to generate 5GW of low carbon hydrogen production capacity by 2030 for industry, transport, power and homes, and aiming to develop the first town heated entirely by hydrogen by the end of the decade.
  3. Nuclear: Advancing nuclear as a clean energy source, across large scale nuclear and developing the next generation of small and advanced reactors, which could support 10,000 jobs.
  4. Electric vehicles: Backing our world-leading car manufacturing bases including in the West Midlands, North East and North Wales to accelerate the transition to electric vehicles, and transforming our national infrastructure to better support electric vehicles.
  5. Public transport, cycling and walking: Making cycling and walking more attractive ways to travel and investing in zero-emission public transport of the future.
  6. Jet Zero and greener maritime: Supporting difficult-to-decarbonise industries to become greener through research projects for zero-emission planes and ships.
  7. Homes and public buildings: Making our homes, schools and hospitals greener, warmer and more energy efficient, whilst creating 50,000 jobs by 2030, and a target to install 600,000 heat pumps every year by 2028.
  8. Carbon capture: Becoming a world-leader in technology to capture and store harmful emissions away from the atmosphere, with a target to remove 10MT of carbon dioxide by 2030, equivalent to all emissions of the industrial Humber today.
  9. Nature: Protecting and restoring our natural environment, planting 30,000 hectares of trees every year, whilst creating and retaining thousands of jobs.
  10. Innovation and finance: Developing the cutting-edge technologies needed to reach these new energy ambitions and make the City of London the global centre of green finance.

There will be a the target of 30,000 hectares of tree planting per year from 2025, and using the Agriculture Act to encourage farming and land use techniques to sequester carbon in the soil and in woodland.

In my view the country is in a good place with the Agriculture Act and there is already a lot of activity in rewilding to allow this to happen quite quickly especially considering tier 2 and tier 3 schemes. I would like to see tier 3 being brought forward from 2024 to help this happen.

I’m fairly comfortable that the current tax system, and including changes potentially to be made under the new review, will fit fairly comfortable with this if rewilding is treated as an activity in the nature of husbandry and so gain various advantages from a tax point of you. And I think this is the way thought is headed now.

Let’s wait and see how this develops.

References

PM outlines his Ten Point Plan for a Green Industrial Revolution for 250,000 jobs

Here we go round the roundabout

Capital gains tax reform

Photo by Christian Chen on Unsplash

Round and round we go. Just as we’ve got used to the new way let’s go back to the old way.

The report published today is on policy design and principles underpinning capital gains tax and sets the stage for second report will be coming out next year we should explore the technical and administrative issues underneath this. The reports have been produced quite quickly which suggests that there is going to be a change on this in the short to medium term.

The report covers only individuals and does not cover trusts or attribution of offshore gains to UK resident individuals nor does it look at the position as regards arrival and departure from the UK. It is therefore fairly narrow in its scope, but arguably seeking to cover most capital gains in reality.

The main recommendations are as follows

  • More closely aligning capital gains tax rates with income tax and addressing boundary issues between capital and income
  • Reduction of the annual exempt amount so it becomes simply an administrative de minimis
  • Back to a formal relief for inflationary gains
  • More flexible use of losses
  • Simplify the large number of capital gains tax rates
  • Looking again at share based rewards arising from employment

Interaction with Inheritance Tax

In addition to the above specific recommendations, the report looks at making the interaction between capital gains tax and inheritance tax more coherent. In particular they discuss the inconsistency whereby on death a business asset can be entitled to a free capital gains tax uplift which is also exempt from inheritance tax.

This widely idea here is that where there is an exemption from Inheritance tax the government would remove the capital gains tax uplift so the beneficiary would receive the asset at original capital gains tax cost. A problem with this is that the original purchase date of many assets is sometimes going to become very historic and records will probably not exist. At the moment on death, the wiping of the slate clean enables capital gains tax to be accurately calculated for the beneficiary.

Back to retirement relief

Interestingly the government seem to have gone full circle on business disposal relief which gives a 10% rate for business assets (which we used to call entrepreneurs relief) and which replaced a retirement based relief 2008. They appear to be going back to the idea of a retirement based relief. Round and round we go . . .

Comment

This report shows quite clearly the pressures on income tax and capital gains tax. Capital gains tax is needed to cover gains made on assets but also to prevent income from wealthy people being converted into capital gains and therefore avoiding taxation.

A de minimis is useful for most people who will never have any significant capital gains other than on small amounts of investments and sometimes some chattels. There is a bewildering a way of reliefs in this area and this could all be swept away by having a small day minimus band.

Reference

Capital Gains Tax review