Darling climbdown on capital gains tax
Alistair Darling has conceded a £200 million climbdown on capital gains tax (CGT).
The chancellor has outlined his final CGT reforms and has maintained a special lower rate for small firms.
Although capital gains will now be subject to a “flat rate” of 18 per cent, a ten per cent rate will apply for the first £1 million over a lifetime.
Mr Darling told the Commons this was still keeping the tax regime as simple as possible but “very much” responds to representations from business leaders.
The move follows sustained criticism from business leaders, who said the Treasury’s planned reforms were being rushed through with little consultation.
In his first pre-Budget report in October Mr Darling announced plans to abolish CGT taper relief, replacing the sliding scale of ten to 40 per cent tax with a flat rate of 18 per cent.
This, small businesses claimed, risked nearly doubling their tax bill, discouraging entrepreneurs and alienating the business community.
It was opposed by Institute of Directors, CBI and Federation of Small Businesses, the later of which suggested a rate of nine per cent for small firms.
The move allows the government to tax private equity bosses at the full rate. Many have been paying tax of just ten per cent on the sale of large companies.
Mr Darling told the Commons he was determined only genuine investors would benefit from the concession.
The so-called “entrepreneur relief” is estimated to cost the Treasury £200 million,
The CGT reforms were ordered to pay for the chancellor’s inheritance tax cut, ordered to counter the Conservatives’ own pledge to abolish inheritance tax on all states worth less than £1 million.