The influential Economic Affairs Committee of the House of Lords has asked the Institute of Chartered Accountants of Scotland to submit a report on the lack of consultation which preceded changes to the Capital Gains Tax (CGT) regime and the changes to deal with the tax status of non-residents and non-domiciled individuals in the UK. The request came as Director of Taxation, Derek Allen and Professor Alex McDougall of the Institute’s Taxation Committee gave oral evidence to the committee yesterday.

The CGT changes announced at the Pre Budget Report in October 2007 were intended as a simplification of the regime – but that simplification also resulted in the rate for business assets increasing from 10% to 18%, prompting a rush of disposals before April 6 this year, to avoid incurring additional cost.

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In addition, there are many unintended consequences to the reform which have denied some taxpayers their legitimate expectations. This undermines confidence in the UK fiscal regime.

Separately, ICAS also recommended to the committee that the UK should consider introducing a statutory definition of residence such as exists in Ireland and the US. This would go some way to avoiding future difficulties similar to those experienced with the recent uncertainty created by announcing the reform of the taxation rules for dealing with people born overseas and visiting the UK to work and live.

ICAS Director of Taxation, Derek Allen said: "ICAS is pleased to have the opportunity to report on the mistakes made in the run-up to the changes to the Capital Gains Tax regime and the proposals to deal with non-residents and non-domiciled individuals. We hope that our recommendations will be taken on board and help to create stability and simplicity in how the Government consults on and makes changes to the tax regime. Simplicity and stability are fundamental to a strong business environment."

(GK/NS)