Overview

When James Callaghan introduced capital gains tax (CGT), it was to shore up the income tax base and to deter tax avoidance through the recharacterisation of income as capital gains. He said: “There is no doubt that the present immunity from tax of capital gains has given a powerful incentive to the skilful manipulator to take full advantage to avoid tax by various devices, which turns what is really taxable income into tax-free gains. We shall only make headway against avoidance of this sort when capital gains are also taxed.”

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