In the face of massive criticism from business organisations, the government has today announced an amendment to its capital gains tax proposals that were to become effective from 6 April 2008. This has been done in the form of a new Entrepreneurs' relief.
This will be targeted on the owners of small businesses, and will apply when they sell their business. The relief will also be available to all employees and company directors who hold at least a 5% stake in a qualifying company. It will take effect from 6 April 2008 alongside the rest of the capital gains tax reform package.
The relief will deliver a 10 per cent tax rate for up to the first £1 million of lifetime capital gains. Individuals will be able to claim relief for gains made on multiple occasions up to a cumulative total of £1 million. Gains in excess of the £1 million lifetime limit will attract the standard 18 per cent rate of tax.
This is a welcome change to the original plans, but will still mean an increase in capital gains tax payable for smaller businesses. By way of example, someone selling a business for £100,000 will pay an extra £2,760 from next year. However, they would still be better off by over £7,000 than with the original proposals.
At least those who were having to contemplate selling their businesses before 6 April 2008, in order to secure the tax levels under the current regime, will not now have to make hurried decisions.
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Budget 2008 report
13 March 2008
Capital Gains Tax climbdown announced
24 January 2008
Capital Gains Tax reforms - how will they affect you?
15 October 2007
Pre-Budget Report 2007
10 October 2007
New Rules for Directors
1 October 2007
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22 June 2007