CGT backlash wins concession from Chancellor
Article Date: Jan 24 2008Chancellor Alistair Darling has confirmed that capital gains tax (CGT) taper relief will be withdrawn from April, and a new rate of 18 per cent introduced. However, in response to widespread criticism of the move from the business community, he has also announced a ten per cent rate on gains of up to £1 million.
The relief, which is worth a maximum of £80,000 to any individual, has already been criticised as inadequate. Neil Pamplin, corporate tax director at accountancy firm Grant Thornton, says that Darling’s use of the phrase ‘entrepreneurs’ relief’ is misleading.
‘This is a lifetime threshold, and most serial entrepreneurs would expect to make significantly more than £1 million over their lifetime,’ Pamplin tells GrowthBusiness. ‘If you were to try and structure your tax affairs around it, it simply wouldn’t be worth the expense and time.’
Pamplin, who is the tax adviser to investment-readiness programme g2i, concedes that the relief may be attractive to those whose businesses are worth up to, or just more than £1 million. But he says it will fail to stimulate serial entrepreneurship or investment in growth.
‘For the entrepreneurs I know and advise, I would seriously question the value and attraction of a tax saving of £80,000,’ he argues.
Pamplin also notes that to claim the tax relief, an individual must hold more than five per cent of a trading business. This means that many employees with shares or share options in their companies will lose out, he says.
‘I also think people will take umbrage at the description of these measures as a simplification, when they have clearly added complications,’ he concludes.
Click here to read the views of entrepreneurs and investors on the withdrawal of taper relief.
