Tax & Accounting News
CGT U-Turn Welcomed
24/01/2008
A major change to Chancellor Alistair Darling’s plans for a
controversial shake-up of the capital gains tax regime is a welcome
respite for businesses.
In his October 2007 pre-Budget report, Mr Darling announced that he
planned to scrap taper relief on capital gains tax (CGT) from April
2008. Currently, someone selling shares or a business they have owned
for more than two years pays CGT at 10p in the pound on profits above
their £9,200 tax-free allowance, instead of at 40 per cent, assuming
they pay the higher rate of income tax.
Mr Darling planned to levy CGT at a flat rate of 18 per cent and to
scrap the indexation allowance, which inflation-proofs an asset's rise
in value, which would have triggered a steep rise in CGT bills.
The proposals attracted opposition from the business community, including
the Institute of Directors, the CBI and the Federation of Small Businesses,
which regarded the plan as damaging disincentive to enterprise and
investment and a serious blow to small business owners planning retirement
sales. A petition opposing the move on the Prime Minister’s website
has attracted more than 18,000 signatures.
Today Mr Darling confirmed that taper relief would cease from 6 April,
when a flat rate of 18 per cent would be introduced – but to
help entrepreneurs, he said there would be a ten per cent rate on gains
of up to £1 million accumulated during their lifetime.
To qualify for the relief, a taxpayer will have to own at least five
per cent of a trading business and be an employee, director or hold
another office within the company. The relief will cost an estimated £200
million a year and 80,000 people could benefit in the next tax year.
Harris Lipman partner Martin Atkins said: “This is welcome news,
which ends several months of uncertainty as the business community
waited for Mr Darling to finalise his proposals. It shows the strength
of the voice of the UK business sector, and its importance in the country’s
economy, that he has modified his plans in the light of some very vocal
opposition.
“While he may not have gone as far in amending his proposals
as some in the business community would wish, this is still a valuable
concession. CGT remains a complex area and anyone considering the sale
of a business or substantial shareholding would be wise to seek the
advice of a qualified professional in exploring the most beneficial
tax options.”
Print
page 