Federation of Small Businesses - Revisions to capital gains tax

Federation of Small Businesses welcomes revisions to capital gains tax plans

For many owners of small businesses the capital tied up in their business is their main source of finance for their retirement. In last year’s Pre-Budget Report the Chancellor Alistair Darling announced a flat rate of CGT at 18%, abolishing taper relief and leaving many small business owners facing potential massive tax rises from April this year.

After weeks of lobbying for change the Federation of Small Businesses (FSB) has welcomed the Government’s response to its request for changes to its plans to reform capital gains tax (CGT).

But the UK’s biggest business organisation warned that trust in the Government has been damaged by the original proposals and the long period of uncertainty over revisions to them.

Only today did the Chancellor outline revisions to those plans. The changes follow closely the FSB’s proposal for an entrepreneurs’ relief. The FSB called for a 9% rate on the first £750,000 of gain. The Government’s new plan would give entrepreneurs a 10% rate on the first £1 million of gain.

Colin Willman, Policy Spokesman East Berkshire said:

“The Chancellor said today that he specifically wanted to help small businesses facing big tax rises from April - which is very good news indeed. At last the Government seem to be starting to realise the importance of small businesses to the economy.

“The entrepreneurs’ relief he announced today is close to the proposals we put to the Chancellor at the end of last year. They go some way to protecting entrepreneurship in the UK as well as benefiting small business owners planning to pay for their retirement through the sale of their businesses.

“We welcome the new proposals, but it is disappointing how the whole issue has been handled. It has seriously eroded much of the remaining trust that small businesses’ had in the Government. There has been huge uncertainty about what small businesses’ tax liabilities would be from April 2008, which has made planning for the future very difficult. Even now small business owners have very little time to prepare before these new changes come in.”

Notes:

1. The FSB’s proposals for changes to the original plans to introduce a flat capital gains tax rate of 18% can be found here: http://www.fsb.org.uk/documentstore/filedetails.asp?id=385.

2. The FSB is Britain's biggest business organisation with almost 1300 business owners as members in East Berkshire and over 210,00 nationally. It exists to protect and promote the interests of those who run their own business – including the self-employed. More information is available at www.fsb.org.uk.

Contacts:
For regional FSB contact Karen Durcan Tel: 0118 945 6848 ro.thamesvalley@fsb.org.uk