In the Pre-Budget Report in
October 2007 the Chancellor, Alistair Darling,
announced a series of changes to the capital
gains tax (CGT) regime for individuals and
trustees. These changes included the abolition
of taper relief and indexation relief and the
introduction of a single rate of CGT of 18%.
The changes take effect from 6 April 2008.
On 24 January 2008, in response to pressure
from the business community, the Chancellor
announced a new ‘Entrepreneurs’ Relief’.
The first £1m of gains qualifying for
relief will be charged at an effective rate
of 10%.
Gains in excess of £1m will be charged
at 18%. An individual will be able to make
more than one claim for relief, up to a lifetime
total of £1m of gains.
Business leaders had been calling for the
re-introduction of a form of Retirement Relief,
which some of you may remember. The rules for
retirement relief required you to have been
in business for a number of years but the new
rules are designed to be simpler:
- there will be no minimum age limit, and
- relief will be available where the relevant
conditions are met for a period of one year.
The relief will apply to gains arising on
the disposal of:
- the whole, or part, of a trading business
that is carried on by the individual, either
alone or in partnership, and
- shares in a trading company, or holding
company of a trading group, provided that
the individual owns broadly a 5% shareholding
and has been an officer or employee of the
company.
Commenting on the announcement Richard Lambert,
Director General of the CBI, said:
‘This is superficially quite clever
and on the surface might seem like a relief
after three months of uncertainty, but even
the smallest business owner will lose taper
relief and indexation and be worse off.
The reality is that these revised measures
will do nothing to help the real business powerhouses
of this country. Although £1 million
might sound a lot, it could have been built
up over twenty or thirty years. It is clear
that the real wealth and job creators of the
UK's economy, selling assets for a lot more,
will be seriously clobbered.
Today's changes still discriminate against
the long-term holding of assets, in favour
of short-termism, and will do nothing to restore
stability to the life insurance market, which
faces a period of turmoil.’
Please do get in touch if you have any immediate
concerns. We will let you have further
detail once this is available.
Internet link:
HMRC
guidance and CBI
Press release |
