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Nov 22nd
| MPs urge changes to Chancellor’s CGT reforms |
| Friday, 30 November 2007 | |
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The all-party Select Treasury Committee has added its voice to those calling on the Chancellor to reconsider his proposed changes to Capital Gains Tax. Under reforms announced in the pre-Budget report, Mr Darling said he intended to introduce a flat rate CGT charge of 18 per cent next April. Although this would simplify the tax regime, there are fears that the abolition of taper relief, which reduces the tax payable on assets that have been held for a set period of time, will hit small businesses and discourage investors from backing enterprises. In its report on the changes, the Treasury Committee has joined business leaders in urging amendments to the plans. The report said that MPs were “concerned that the Treasury appears not to have consulted explicitly on the withdrawal of taper relief” and requested that the government explain how it “proposes to mitigate the effects of the withdrawal of taper relief”. The Committee also registered its worry that the new flat rate, which will see the amount of tax that some business owners pay rising from 10 per cent to 18 per cent, will adversely affect those entrepreneurs who are planning on retiring from or selling their businesses in the next two years. Reports have circulated that the Chancellor is to recommend that retiring entrepreneurs be allowed a tax exemption on the first Ł100,000 of any sale, but there has been no official confirmation. John McFall, the Labour MP and chairman of the select committee, said: “The Chancellor told us that ‘sometimes the Treasury consults on these things and sometimes it does not’. Changes such as this will generally benefit from consultation. “Tax simplification is a desirable objective but the reforms of capital gains tax will have an immediate impact on many individuals and businesses that have sought to plan ahead. There is a window of opportunity for meaningful consultation between now and the 2008 budget, and the Treasury needs to establish clearly the terms for such consultation.” Elsewhere, a survey conducted on behalf of the CBI revealed that 40 per cent of SMEs planned to alter their investment strategies as a result of the changes and 63 per cent did not believe that the reforms would reduce the level of red tape. A Treasury spokesperson commented: “The changes to capital gains tax are the right thing to do, make the system more sustainable and straightforward and help investors plan for the long term. The Treasury is working with the business community to further improve the business environment and to continue to encourage entrepreneurship.” |
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