DEADLINE LOOMS FOR CGT CHANGE (30/1/2008)
Burgess Hodgson is expecting a flurry of activity after Chancellor Alistair Darling announced he would push ahead with his plans to scrap taper relief and introduce a single rate of 18 per cent for Capital Gains Tax (CGT).
The new flat rate – which is set to be introduced from April 6 this year – could see many large business deals pushed through before the deadline as owners of multi-million pound businesses and so-called ‘serial entrepreneurs’ look to take advantage of the existing low rate.
But it’s better news for smaller businesses, with the announcement of a 10 per cent rate on gains of up to £1m, which should help the owners of small firms who sell their businesses in the run up to retirement.
Some business groups have condemned the measures, particularly given the fact that big companies are expected to be the big losers. Taper relief currently allows some higher rate taxpayers to pay as little as 10 per cent CGT on profits from the sale of assets in any unlisted trading company or publicly-listed firm they work for, as long as they have held them for two years.
The new 18 per cent figure is expected to curb this activity, although as Ken Jones, partner at Burgess Hodgson points out, given the historical highs of CGT – as much as 40 per cent – the new figure is still relatively benign.
“The reality of the Chancellor’s new measures means that anyone thinking of selling a business or assets worth several million could still benefit from the 10% CGT figure – provided the deal is finalised before the April 6 deadline,” said Ken. “After that cut off, mid and large-sized firms will be paying a lot more tax!”
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