Gengulphus wrote:And the suggestion in this report that the CGT allowance might be reduced to a third or less of its current amount while still acting as an "administrative de minimis" should serve as a reminder that there is a possibility that one might one day have to account for CGT, even for those for whom it currently seems an impossibly distant prospect: tax law changes can potentially make much more major differences to such matters than one thinks are at all likely to happen in the normal course of events.
I.e. basically, my suggested policy on keeping share transaction records is "if you still own the shares, keep the transaction details, however old they are - and if you cease to own them, continue holding them for at least a few years". I would add that in these days of cheap computer storage and the transaction details generally being in electronic documents rather than paper documents, it is actually easier to keep the records than to dispose of them. With paper records, there comes a point where one needs to go through them, weeding out the no-longer-relevant ones, because one simply doesn't have the physical space to store the old records - even though doing the weeding out may be quite a bit of work, and disposing of the weeded-out paper documents safely more work. But with electronic documents, a very easy method is just to start a new folder each tax year and leave all the old tax years' folders untouched (or just move them en masse to a back-up disc if one's main disc is uncomfortably full).
It is of course prudent to keep transaction records, including subsequent events that effect the cost basis such as corporate actions. But the problem in many cases is that people will not have kept records of things that they previously had no reason to keep a record of.
So for example since indexation went away, there has been no need to retain the original purchase date of a share, because it does not affect the determination of the capital gain when sold (leaving aside the special case of the 30 day rule). So I for one have not kept such records for my positions. I can tell you the number of shares and the cost basis, and I will know the date of sale and the net proceeds. But the original purchase date and dates of any subsequent transactions is not material.
So if the CGT rules were now changed to make that important again, say if indexation were reintroduced, then I would have a problem.
Now you might be more thorough than I and keep that anyway. But then you might still be vulnerable to some other kind of rule change that requires other data that you have to date had no reason to think you would ever need.
The correct approach therefore, in my view, would be to grandfather existing positions into the current rules, and have the new rules apply only to newly established positions.
More generally, if the CGT rules are made more complex and/or more punitive, there might inevitably be an increase in evasion. People will either resent paying (say) income tax rates on capital gains, or what they perceive as double taxation, or they may find the extra work involved to be unreasonable or impossible. And unlike dividend and interest income, details about sales and gains are not reported in a consolidated tax certificate or any other form that I know of. HMRC is 100% reliant upon you declaring the gains completely and correctly. It has no easy way of cross-checking that and can only investigate a tiny fractions of the people who have gains each year.
If the net result of changes like these deter the reporting of gains AND deter people selling in the first place, then the extra revenue the government hopes to get from such changes may never materialise, so what would have been the point?