asked the Chancellor of the Exchequer if he has yet decided whether it is necessary to deal with the question of losses for capital gains tax purposes referred to by the Chief Secretary in the House on 8 May, Official Report, 8 May, column 819.
At present, gains on gilt edged securities and qualifying corporate bonds are exempt from capital gains tax if the securities are held for more than 12 months. Following a review of this treatment in the light of the introduction of the accrued income scheme, and as a further measure of simplification, it is now proposed to exempt these securities entirely from capital gains tax.This exemption will apply to disposals of gilts and qualifying corporate bonds on or after 2 July 1986 and, to avoid further complication, amendments to the Finance Bill indexation provisions will be proposed so that they have no application to these securities.As a result, taxpayers will no longer need to keep records or include these securities on their tax returns for capital gains tax purposes. At the same time, it will remove the possibility that the CGT indexation provisions could be deliberately used to establish short-term capital gains tax losses on these instruments, where counterbalancing gains would not normally arise because holders would delay realising gains until 12 months after purchase.The Inland Revenue is today issuing a press release giving further information about these proposals and of the necessary consequential legislative changes. The changes will be introduced at Report stage of the Finance Bill.