Whispers of a U-turn on capital gains tax emerged yesterday, amid reports that entrepreneurs who sell their businesses won’t be clobbered by the recently inflated rate of 18 per cent.
Unnamed government sources, presumably at the Treasury, told reporters that retiring owners will be exempt up to the first £100,000 they make on the sale of their business.
Current proposals, however, dictate that sales of business assets attract tax of 18% from April next year, up from 10%, but this may now apply only when the sale exceeds £100,000.
If the sources are right, the move would reinstate the old retirement relief, which offered exemption for profits up to a certain value, designed to save retiring owners from huge tax.
“This really takes us back to 1998, when we had capital gains tax retirement relief, although the exemption threshold then was much higher than £100,000,” Stephen Almabritis, of the Federation of Small Businesses, told Radio 4 Today’s programme.
However the Treasury is yet to set the extent of the relief, aimed at taking the sting out of the row over CGT, though insiders told the Daily Telegraph it may run into “tens of thousands.”
In its leader column, the paper commented: “This willingness to perform a U-turn when it becomes apparent that policies have not been thought through is welcome.
“But it does raise questions about why these policies saw the light of day in the first place.”
Reflecting on the prospect of a one-off tax free gain for retiring entrepreneurs, the CBI said it would be the “first helpful step” to tackling reforms Alistair Darling unveiled in his Pre-Budget Report.
“Nobody must be under any illusion that this will resolve the issue,” said Richard Lambert, the group’s director-general.
“There are many other businesses and investors who need help as a result of these ill-thought out pre-budget changes.”
The FT understands the Treasury is also considering other tax breaks to encourage entrepreneurs, including incentives for high-risk investment, though outright giveaways are unlikely.
Not only will the core elements of CGT reform remain, such as the scrapping of taper relief, but entrepreneurs ‘retiring’ at an early age will not be able to start another business, and benefit again.
Mr Alambritis added: “We will have to look at that £100,000, but it is a little detour on the way to what we would actually prefer, which is a whole U-turn.”
Shadow children’s secretary Michael Gove this week explained his thoughts on why Gordon Brown’s government introduced the hike to CGT in the first place.
The on-off columnist for The Times reportedly accused the prime minister of having an “itch to centralise and a faith in bureaucratic control which speaks of nothing so much as an attachment to power itself.”
Nov 1, 2007
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