Following many months of lobbying by business groups across the UK, the Chancellor has announced a u-turn on the controversial CGT reforms he proposed in the 2007 Pre-Budget Report.

In the PBR, Alistair Darling said he would be abolishing capital gains tax taper relief and replacing it with a single 18% flat rate on the sale of business assets.

In what will be seen as a partial victory for business pressure groups, the Chancellor will now allow entrepreneurs to pay capital gains tax on the sale of business assets - up to £1million in value at 10%. The CGT rate on sales above this figure will be at the new flat rate of 18% when the new capital gains tax regime comes into place.

Importantly, the Treasury says the new relief, which takes effect from 6th April 2008, will allow the 10% on the first million of lifetime capital gains. Individuals will be able to claim relief for gains made on multiple occasions up to a cumulative total of £1 million. Gains in excess of the £1 million lifetime limit will attract the standard 18% tax rate.

On announcing this backtrack to the House of Commons, Darling said that the concession would cost around £200m per year and benefit around 80,000 people.

The move is bound to please IT contractors who may sell business assets in the future, as under the original CGT proposals, they would have faced an 80% increase in tax.

Naturally, any IT contractors lucky enough to earn over the £1m mark for their business sales are bound to be disappointed by today's announcement.

You can read more background and business reaction to the CGT relief changes, and hundreds of dedicated tax and accounting guides for small businesses at our sister site, Bytestart.