CGT Taper Relief abolition creates UK business backlash

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CGT Taper Relief abolition creates UK business backlash

Posted Nov 6, 2007

In his Pre-Budget Report, the Chancellor outlined several tax changes to be introduced from April 2008. One of these - the abolition of the Capital Gains Tax taper relief regime has created a massive business backlash from UK businesses.

Under the current CGT system, if you sell a business asset, the CGT you pay reduces over time (taper relief), so many business owners pay just 10% CGT on the sale of their businesses.

From April 2008, there will be a flat 18% rate on sales of business assets - an 80% increase on the previous rate in many cases.

General investors in the stockmarket and property will find their position improved, although accumulated indexation allowance will no longer be available.

Although many IT contractors currently provide consultancy services via their limited companies, a number of these businesses will evolve over time into larger ventures - some may employ staff.

As a result of the Chancellor's CGT proposal, contractors who sell their businesses will be faced with a large CGT hike - almost double the previous rate.

Since the Pre-Budget Report was unleashed, all the key small business organisations (FSB, FPB, BCC, IoD) have slammed the changes as clumsy and unfair.

More recently, several major newspapers have reported that the Chancellor is considering giving business owners a £100,000 "relief fund" if they sell their businesses upon retirement. This, of course, doesn't help entrepreneurs and other business owners who may sell their businesses before retirement.

Understandably, this possible retirement CGT "concession" has also been ridiculed by the business world.

You can even join the Shadow Chancellor and sign the Forum of Private Business petition to consign the proposals to the dustbin before next April.

For the latest Capital Gains Tax commentary and updates, visit Bytestart, our small business portal.

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