The proposed changes announced in the Pre-Budget Report to the capital gains tax (CGT) system are radical. Taper relief for CGT will be abolished for disposals on or after 6 April 2008. Other changes to the CGT system include introducing a flat rate of CGT of 18% and abolishing indexation, an allowance for inflation.
Last month we reported that the Chancellor, Alistair Darling, had said at the CBI conference that he would ‘publish final proposals’ in December 2007. There have been many rumours of changes to the proposals including the introduction of some form of retirement relief, with the figure of £100,000 being mentioned by several sources.
Alistair Darling has now said that final proposals will not be issued before the New Year, which has disappointed many, as it gives little time to plan effectively before the introduction of the new rules.
On 17 December 2007 the Director General of the CBI, Richard Lambert, expressed disappointment at the Chancellor’s decision to postpone an announcement.
Richard Lambert said:
‘We are glad that the Chancellor is paying attention to the submissions he has received from the business community, but he needs to get on with this decision urgently, as he promised at the CBI’s conference a fortnight ago.
People need to be able to make decisions about their businesses – whether to invest, or whether to sell up. This uncertainty mustn’t be allowed to continue.’
The proposed changes will generally increase the amount of tax payable by individuals who own assets that currently qualify for full business asset taper relief but everyone has different costs and entitlements to reliefs, so it is difficult to speak in generalities.
If the government does introduce a form of retirement relief then it may be beneficial to retain business assets and dispose of them on or after 6 April 2008 depending on the amount of the relief, the conditions which have to be met and how it is calculated.
We will continue to keep you informed of developments. However if you have any concerns please do get in touch.