Press Releases
CGT U Turn Welcomed
A major change to Chancellor Alistair Darling’s plans for a controversial
shake-up of the capital gains tax regime has been welcomed by Bradford
based Watson Buckle as a 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.
John Kinsella, Tax Partner of Watson Buckle 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.”
