CGT hike u-turn on the cards for retiring business owners

Just weeks after the Chancellor controversially announced a new flat 18% CGT rate on business sales, several leading newspapers have reported that the Government is preparing to make a significant concession by creating a "relief fund" for retiring business owners.

In the Pre-Budget Report, the Chancellor announced the abolition of CGT taper relief from 6th April 2008 - to be replaced by a single, flat rate tax on business sales.

Predictably, given the inequitable and clumsy nature of the proposed CGT change, the business world has come out strongly against the Government on this issue. All major business groups have united against the measure.

Now, it appears that the Government is preparing to make a concession.

The Telegraph reports that a Government u-turn is on the cards. The rumoured amendment would mean that, when a business owner retires, they would effectively receive an exemption on the first £100,000 they make on their business sale.

According to the paper, "It will be a one-off "tax free gain" in order to stop businessmen abusing the system. People "retiring" at an early age will not be able to start another business and benefit again."

While this is only a partial u-turn, it does suggest that the Government acknowledges that the proposed CGT change is perhaps the most anti-entrepreneurial measure it has implemented in the past 10 years - more so, perhaps than the cynical move to raise the small business tax rate over the next 3 years while simultaneously lowering the main (big company) corporation tax rate.

Unfortunately, even if this concession is granted, it will be of little comfort to non-retiring business owners, who presumably will still be hammered for the full 18% CGT rate when selling business assets.

Commenting on the newspaper speculation, David Frost - Director General of the British Chambers of Commerce, came to the same conclusion, "...there is a wider concern in that the serial entrepreneur, those that build businesses, will still be hit by the proposals to have a higher single rate of 18%. This will damage the entrepreneurial culture in the UK."

The u-turn has also been reported in The Times today.