ContractStore Legal Business Blog

The Government’s assault on small business has had a slight reprieve with the latest change of mind concerning capital gains tax. Last autumn, the Chancellor announced the ending of the 10% rate for businesses and the introduction of a new, flat rate of 18%. Since, ostensibly, the change was intended to do something about the massive gains of private equity firms and the people most hit would be owners of small and medium businesses, there was a fully justified outcry.

The latest position – which still has to be confirmed in the Budget next month – now seems to be:

• A flat rate of 18% will be charged on all capital gains from April – this will cover business and non-business gains, so the same rate will apply whether you are selling your business, a painting or a buy-to-let property
• The first £1 million of gain will be at the rate of 10% for certain business assets – this is to be known as ‘entrepreneur’s relief’.
• Indexation allowance and taper relief will no longer apply – i.e. there will be no adjustment to the rate however long you have owned the asset. Gains on assets owned on 31 March 1982 will be calculated by reference to their market value at that date.
• In our view it is time for the Government to introduce a fairer tax system that taxes the mega-profits of the City instead of the hard-earned gains of smaller businesses.

The Chancellor might say he is trying – but his clumsy proposal to impose a £30,000 charge on non-doms is not the cleverest idea to come out of the Treasury. And small businesses have already suffered recently with the removal of the corporation tax exemption for the first £10,000 of profits.

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This entry was posted on Wednesday, February 20th, 2008 at 9:49 am and is filed under ContractStore News, Running an SME, UK Law. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.