Chancellor of the Exchequer Alistair Darling has announced that, from April, entrepreneurs will only pay 10 per cent tax for the first £1m of lifetime capital gains then 18 per cent for gains over that amount.
Most of the CGT proposals released last October will remain, including the abolition of taper relief.
Duncan Cheatle, the founder and CEO of The Supper Club, says it’s an “own goal” from the government. “It provides a retirement relief for small players – people who run a pub or a shop,” he says. “It’s something to appease the very small businesses that don’t grow and expand.
“It does everything to discourage those that are genuine entrepreneurs – those that create jobs and have fast-growing businesses that will certainly go beyond a million-pound turnover.”
Lewis PR CEO Chris Lewis agrees that “at the smaller end, people will welcome this change with a sense of relief”, although it still means a huge tax burden for business.
“This is like being mugged by a violent drunk last night and having him come back the next day rather remorseful and shame-faced, handing back an empty wallet,” he says.
“Why doesn’t the government grant an ASBO for Alistair Darling? Ban him from the business community, keep him away from us.”
Both Lewis and Cheatle believe this move will have huge repercussions for the government. Lewis says: “Many entrepreneurs are Labour supporters. That instantly transformed overnight. The government has fallen and we’re now waiting for an election to confirm that.”
Cheatle says: “This latest announcement is hugely short-sighted and very disappointing. It doesn’t help the economy and enterprise, especially when we’re going to go into a tough time.
“I think this is really going to haunt the Treasury. It’s a fool-hardy move; a lot of people have said it intuitively feels stupid and not right. Entrepreneurs have put up with so many changes and tax creeps over the past few years and on the whole they’ve been supportive. I think the government has destroyed that. I don’t know what they can do to recover.”
What does the announcement mean?• Capital Gains Relief will be at a 10 per cent tax rate for up to the first £1m of lifetime capital gains.
• Individuals will be able to claim relief for gains made on multiple occasions up to a cumulative total of £1m.
• Gains in excess of the £1m lifetime limit will attract the standard 18 per cent rate of tax.
• CGT taper relief will be scrapped from April 2008 and replaced by a single rate of 18 per cent.
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