The Worshipful Company of Tax Advisers

History of Tax Lecture – 14 Oct 2025

HISTORY TAX – ORIGIN OF THE CGT EXEMPTION FOR THE HOME

DAVID COLLISON

14 October 2025

 

WCOTA was delighted to welcome David Collison to give the most recent History of Tax talk. This was David’s second visit to the History of Tax group, but as his first was a talk on the origins of CGT given on line during Covid, it was good to welcome him in person.

David returned to the topic of CGT, this time to discuss the origins of the CGT exemption for the home. At the start he quoted the late John Tiley as saying that the exemption of the main private residence from CGT was anomalous and was a political decision, and then gave a masterly explanation of the development of this relief which included views from academia, as well as political pragmatism and the influence of the (then) Inland Revenue.

Whilst CGT was introduced in James Callahan’s first Budget in November 1964, a tax on capital gains had been considered as early as 1919 by Austen Chamberlain. Central to David’s talk was Nicholas Kaldor, arguably the main architect of CGT. Kaldor was a Socialist economist who was appointed as Callaghan’s special adviser on taxation, and throughout his career he had considered mechanisms to tax capital gains, including gains on the disposal of a taxpayer’s main residence. In 1951, as a member of the Royal Commission into the taxation of profits and income, he was instrumental in appending a Memorandum of Dissent to the Royal Commission’s report, outlining a minority view in favour of the introduction of a tax on capital gains.

Following the Royal Commission, Kaldor continued to consider taxing capital gains and his ideas were considered by a Labour working party in 1964. Whilst the working party broadly supported taxing large gains from the sale of substantial properties, there was less support for taxing gains on smaller houses.

Despite the academic rigour of Kaldor’s arguments, David posited that the deciding factor for an exemption from tax for the main home, was an Inland Revenue report on a capital gains tax, and specifically the wording of that report. The Inland Revenue suggested three different approaches for relief from capital gains on the home – a full exemption, an exemption up to a limit, and a form of rollover relief. The report indicated that any approach other than a full exemption would be costly to police. It was this resource issue that David suggests swayed Callaghan, as an ex Inland Revenue official, to opt for a full exemption.

David’s talk was clear, most interesting, and extremely well researched. We very much hope that David will return to give another History of Tax talk in the future.

The next History of Tax event is on 3 February 2026 when Dr Maria Kendrick will talk on “The debt experiment: how the history of taxation informs the future of public debt”.