However, many businesses are passed on to the next generation anyway, often very successfully, so encouraging this to happen earlier may not have a significant impact on the long-term success of those businesses and, consequently, the wider economy.
What might be the impact for second homes?
If second homes were to be sold or passed down during their owner's lifetime rather than on death, this might rebalance the property market to some extent, particularly in scenic parts of Britain where local people currently struggle to afford property. This may have benefits for the local economy in such areas.
However, if the effect of second homes being sold is to rebalance the market significantly, that is likely to also result in prices being driven down, potentially leading to a lower CGT take.
Other alternatives?
The problem for the government is that they have ruled out increases to the rates of income tax and VAT, small increases to the rates of which bring in far greater tax returns than are achievable through CGT or IHT.
Given this constraint, reforms to CGT, IHT or both may be unavoidable, as part of a wider package of tax rises. Ideally, this would involve a full review of both taxes and consideration of all alternatives.
For example, IHT could be scrapped entirely in favour of a more sophisticated form of CGT.
CGT is a far less emotive tax as it is only imposed on gains rather than the whole asset value. This would also avoid complaints of double taxation on death if the tax-free uplift were withdrawn without any change to IHT.
The government could also look at a form of the capital acquisitions tax that exists in Ireland and other countries, and which taxes receipts rather than transfers.
Any overhaul would require a full consultation, which would be a lengthy process.
John Annetts is a partner and head of wealth and succession at Howard Kennedy
