Dormant Assets Scheme expansion
Published 27 October 2021
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Who is likely to be affected
Individuals who have identified assets that have been transferred into the expanded Dormant Assets Scheme.
General description of the measure
This measure ensures that a Capital Gains Tax (CGT) charge does not immediately arise when certain assets that have been identified as being dormant, for the purposes of the Dormant Assets Scheme, are liquidated (“monetised”) and their monetary value transferred into the expanded Dormant Assets Scheme. A CGT charge will only arise when an individual identifies that their assets have been transferred into the Dormant Assets Scheme and receives a payment in respect of those assets.
Policy objective
The existing Dormant Assets Scheme enables banks and building societies to channel funds from dormant bank and building society accounts towards good causes. In 2021, following a consultation, the government announced its intention to expand the scheme to include certain assets from the pensions, insurance, investment and wealth management and securities sectors to be used for public benefit, whilst protecting the original asset owners’ legal right to reclaim the amount that would be due to them had a transfer into the scheme not occurred.
Under the expanded scheme certain assets must be monetised before transfer into the scheme and, without this measure, this transfer would be classed in certain cases as a disposal for CGT purposes, resulting in either a gain or a loss. As the asset owner cannot be located and does not know that the transfer to the scheme has occurred, it is not appropriate or feasible for tax to be paid by the individual at the point of transfer to the scheme, or for a notice of a loss to be made.
The policy objective is to ensure that where a gain is made a CGT charge will accrue at the point when those proceeds are reclaimed and received by an individual. Where a loss is made the individual will not be out of time to give the notice to HMRC for that loss. This broadly ensures that the individual remains in the same position for tax purposes as they would have been in had the asset not been transferred into the Dormant Asset Scheme.
Background to the measure
At the Tax Policies and Consultations update on 23 March 2021 the government announced its intention to amend tax legislation to assist with the expansion of the Dormant Assets Scheme.
Detailed proposal
Operative date
This measure will take effect once the Dormant Assets Bill becomes law and the necessary commencement order has been made.
Current law
Section 39 of the Finance Act (FA) 2008 allows the Commissioners for HMRC to make changes by regulation to the taxation of interest and the reporting of interest income with respect to dormant bank and building society accounts within the ambit of the Dormant Assets Scheme.
Section 26A of the Taxation of Chargeable Gains Act 1992 (TGCA 1992) applies to monies that are held in dormant bank and building society accounts that are transferred into the Dormant Assets Scheme. It ensures that dormant account holders who make successful claims to the scheme’s administrators for the repayment of those monies, are in the same tax position as they would have been without the scheme.
Proposed revisions
Section 39 of FA 2008 will be amended to reflect the expansion of the scheme by the Dormant Assets Bill, when it becomes law.
Section 26A TGCA 1992 will be amended to apply to the wider range of assets that are now included in the Dormant Assets Scheme. In certain cases, monetising these assets for inclusion in the Dormant Assets Scheme could give rise to a gain or loss for CGT purposes. The amendment ensures when an asset is monetised any gain or loss only accrues at the point that the asset’s proceeds are paid to an individual who has come forward and made a successful claim for repayment of those proceeds. This ensures that the customer is in the same position for tax as they would have been without the scheme.
Summary of impacts
Exchequer impact (£m)
| 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 |
|---|---|---|---|---|---|
| negligible | negligible | negligible | negligible | negligible | negligible |
This measure is expected to have a negligible impact on the Exchequer.
Economic impact
This measure is not expected to have any significant economic impacts.
The terms used in this section are defined in line with the Office for Budget Responsibility’s indirect effects process. This will apply where, for example, a measure affects inflation or growth. You can request further details regarding this measure at the email address listed below.
Impact on individuals, households and families
This measure ensures that a disposal for CGT purposes does not occur when assets that have been identified for inclusion in the Dormant Assets Scheme are monetised. This creates fairness and certainty for individuals as it ensures that they will not face any penalties for failure to account for tax at the time the asset’s proceeds are put into the fund.
Customer experience is expected to remain broadly the same as this measure does not alter how individuals interact with HMRC.
There is expected to be no impact on family formation, stability or breakdown.
Equalities impacts
This measure only affects individuals who are making claims for the return of proceeds derived from assets that are transferred into the Dormant Assets Scheme. Whilst it is not known who those individuals might be, based on knowledge of the existing scheme and dormancy definitions outlined in the government response to the consultation on expanding the Dormant Assets Scheme, they are likely to be individuals who have forgotten about the assets or are the beneficiaries of those who have died and are unaware of the asset’s existence.
The change will have a positive impact for those making claims, regardless of protected characteristics.
Impact on business including civil society organisations
This measure is expected to have no impact on businesses or civil society organisations. It only affects individuals who have made a claim for the return of proceeds derived from assets that have been transferred into the Dormant Assets Scheme.
Operational impact (£m) (HMRC or other)
HM Revenue and Customs will not incur any costs implementing this change.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be kept under review through communications with affected taxpayer groups.
Further advice
If you have any questions about this change, please contact Nick Williams on Telephone: 03000 585660 or email: capitalgains.taxteam@hmrc.gov.uk