Whether it was really aimed at private equity investors or not, the fact remains that this reform will affect far more people, for example entrepreneurs, family-owned businesses, employees who participate in Save as You Earn schemes – all will find that some of the tax benefits they received from investing in businesses for the long term will be lost.
To justify this as a move towards simplification of the tax system is all well and good. Indeed, as a professional accountancy body, tax simplification is something that we have been calling for many years – but there is a price to be paid for a radical tax simplification that will throw up some winners and rather more losers. The price of simplification needs to be reasonable one. For business to have trust and confidence in the tax system, there is a need for prior consultation of proposed simplification reforms, coupled with the need for certainty and for the reasonable expectations of taxpayers to be respected. There is a real danger that the way in which these changes to CGT have been proposed, and the short notice given before they are implemented, will only serve to undermine trust and confidence even further.
What is important is that this proposal doesn’t result in a stand-off between Government and business. That’s why we are going to look in detail at the implications of the Chancellor’s proposals. Who will be affected and how? Only then will we be in a position to say to Government if this is the most effective way to achieve their policy goals. We fully support tax simplification, but there is a balance to be struck and it is essential that any tax simplification is only undertaken with full consultation and reasonable transitional rules. Post your commentCommentsIt is really disappointing that, after years of lobbying by our tax faculty and others, the first major tax simplification ‘result’ is the 18% flat rate which will hit our business-owning clients. Simplification in the field of CGT is well overdue, as the taper relief rules were so ill thought through, and are a classic example of why tax changes should be properly consulted on before being brought in. To charge 18% instead of 10% and to axe the indexation relief on the retiring small businessman, when he is already disappointed at the loss of pension arsing from a previous stealth tax, is a double blow.
There is never a good time to introduce unfair and arbitrary measures. This is unfair because the sale of a small business should attract less tax than an investment. The timing seems particularly inept, in view of the rumour that HMRC is expected to lose some 25% of its staff to save costs, as this will no doubt result in a loss of customer service
So I’m glad that I and my partners incorporated our accountancy practice recently, to benefit by the 10% CGT rate which will still be with us till next April. This option is only a partial solution and will not work for all.
Good luck to everyone involved in further lobbying as this has already resulted in the £100,000 retirement relief proposal, which should be a big help for very small businesses.
Mrs Angela Riley - 5 November 2007