The CGT backlash

“The bottom line is that the reaction of the UK government, in the face of an economic slowdown, has been to slap on a major tax hike of £700m. This will have a damaging effect on job creation, investment and savings at exactly the wrong time in the economic cycle.

“This tax hike has been badly handled from start to finish. It was rushed out without consultation and there has been precious little since, despite the interminable wait for these revised plans. To be given ten weeks to make major business decisions is simply not reasonable. The relationship between government and business has been damaged by this affair and will take time and effort to rebuild.”Richard Lambert, CBI director-general

“We welcome these plans, but the way in which the whole issue has been handled has seriously eroded small businesses’ trust in the Government.

There has been huge uncertainty about what small businesses’ tax liabilities would be from April 2008 and this has made planning for the future very difficult. Even now, small business owners have very little time to prepare before these new changes come in.”John Wright, FSB national chairman

“We will always welcome moves to create simplicity in the tax system. But this needs to go hand-in-hand with providing certainty to taxpayers and being willing to listen to those affected. Frequently tweaking the UK tax system – as has been evident with the CGT system – only adds to complexity.”Kevin Nicholson, UK head of entrepreneurs and private companies, PricewaterhouseCoopers

“The chancellor’s announcement has failed to address the main issue. Whilst the traditional business man building up one business throughout his working life will benefit, the serial entrepreneur’s benefit is very small.

“It was precisely these people who contribute to the continuing success of the country’s economy that were originally being incentivised by the introduction of taper relief in 1998 who are still being penalised for that effort. A sop to little Britain!” Penny Bates of accounting firm Menzies

“It has been a hard slog to win the government round on this issue, and they have taken their time in coming to a decision that is more palatable for the UK¹s SME sector. The lesson for the future is for government to consult with interested parties before making such drastic changes, rather than having to go through a retrospective process that frustrates and engenders lack of trust.”Chas Roy-Chowdhury, head of taxation at ACCA

“In proposing the flat rate, I believe the chancellor was blinded by his target of private equity and forgot about the small businesses that are the lifeblood of this country. That has now been set to rights, but I still despair for the UK’s serial entrepreneurs.”Francesca Lagerberg, head of national tax at Grant Thornton“The chancellor’s climbdown on capital gains tax reform was inevitable and is a stark demonstration of the pitfalls of making up tax policy over a weekend. The truth is that capital gains tax does need reform but it must be done through full and open consultation with business, not written on the back of a fag packet in a bid to pull together a snap election manifesto.” Vince Cable, Liberal Democrat Shadow Chancellor”It is certainly much better news than the announcement last October but the relief is limited to £1m and many owner-managed business will be worth considerably in excess of this figure. It is unlikely that owner-managers already in the process of selling their business to take advantage of the current ten per cent rate on their entire gain, will be persuaded to hold fire for the very limited relief in the future that the Chancellor is currently offering. It really is a case of too little to late!”Carol Barrie, Tax Partner, RSM Bentley Jennison

“While small businesses will be grateful for this, there are strings attached – a five per cent holding in the company will be needed, and the allowance is only available once in a lifetime, so may not benefit serial entrepreneurs. It seems though that there is no two year holding period as there is for the current ten per cent rate. Large scale entrepreneurs will still suffer the 18 per cent rate on gains once they have used their £1,000,000 limit. If they want to take advantage of the old ten per cent rate, they will need to either sell their company prior to 5 April 2008, which is a very short time scale, or enter into complex tax planning.”Tony Cohen, head of entrepreneurial business at Deloitte

“This was a long wait for nothing which fails to shake off the ghost of taper relief. It’s a small handout designed to pacify an irate business community, but will do nothing to help those who have built up businesses worth over £1m. We are now effectively back to 1998, before Gordon Brown scrapped retirement relief and introduced taper relief. I would have at least liked to see some transitional relief. That would have been fairer and have given businesses caught in the 10-18 per cent trap time to take stock.”Richard Garrod, tax partner at Mazars

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