Landowners who sell inherited property could face higher capital gains tax (CGT) bills under proposals that were presented to the UK government last week.

CGT is a tax charged on the profit when someone disposes of an asset that increased in value during the time they owned it. For farmers it mainly applies to the sale of farmland.

In its latest report, the Office of Tax Simplification (OTS) has recommended that the government consider removing a mechanism known as the “capital gains uplift”.

At present, if farmland is signed over to a successor during the previous owner’s lifetime and is later sold, the successor is likely to face a higher CGT bill than if the previous owner had waited until their death before transferring them the land.

The OTS argue that scrapping the capital gains uplift would remove the incentive to wait until death before transferring property that is likely to be sold down the line. A similar recommendation was made by the OTS in July 2019, but the government did not include it in the following budget.

However, of note for most NI farmers, there is no proposal to charge CGT on properties which are transferred to a successor and not sold. The OTS recommend keeping and extending “gift holdover relief” which allows no immediate CGT bill if, for example, a property is signed over to a family member and stays in their name.