Entrepreneurs'
Relief
In the Pre-Budget Report in October 2007 the Chancellor,
Alistair Darling, announced a series of changes
to the capital gains tax (CGT) regime for individuals
and trustees. These changes included the abolition
of taper relief and indexation relief and the introduction
of a single rate of CGT of 18%. The changes take
effect from 6 April 2008.
On 24 January 2008, in response to pressure from
the business community, the Chancellor announced
a new ‘Entrepreneurs’ Relief’.
The first £1m of gains qualifying for relief
will be charged at an effective rate of 10%.
Gains in excess of £1m will be charged at
18%. An individual will be able to make more than
one claim for relief, up to a lifetime total of £1m
of gains.
Business leaders had been calling for the re-introduction
of a form of Retirement Relief, which some of you
may remember. The rules for retirement relief required
you to have been in business for a number of years
but the new rules are designed to be simpler:
- there will be no minimum age limit, and
- relief will be available where the relevant
conditions are met for a period of one year.
The relief will apply to gains arising on the
disposal of:
- the whole, or part, of a trading business that
is carried on by the individual, either alone
or in partnership, and
- shares in a trading company, or holding company
of a trading group, provided that the individual
owns broadly a 5% shareholding and has been an
officer or employee of the company.
Commenting on the announcement Richard Lambert,
Director General of the CBI, said:
‘This is superficially quite clever and
on the surface might seem like a relief after three
months of uncertainty, but even the smallest business
owner will lose taper relief and indexation and
be worse off.
The reality is that these revised measures will
do nothing to help the real business powerhouses
of this country. Although £1 million might
sound a lot, it could have been built up over twenty
or thirty years. It is clear that the real wealth
and job creators of the UK's economy, selling assets
for a lot more, will be seriously clobbered.
Today's changes still discriminate against the
long-term holding of assets, in favour of short-termism,
and will do nothing to restore stability to the
life insurance market, which faces a period of
turmoil.’
Please do get in touch if you have any immediate
concerns. We will let you have further detail
once this is available.
Internet Links:
HMRC
guidance and CBI
Press release |
