CGT u-turn may help small business people, but not 'entrepreneurs'

Reaction to the Chancellor's recent u-turn on Capital Gains Tax continues to mount up. Overall, most business groups have been unimpressed with the 10% lifetime CGT allowance 'concession'. Representatives of London’s innovative investment-readiness programme, gateway2investment, say Alistair Darling's CGT 'simplification' won't actually help real entrepreneurs.

Neil Pamplin, tax director at Grant Thornton, tax adviser to g2i, said, “I take umbrage with at this ‘entrepreneur’ tag as this would denote a serial investor. I would question whether a serial entrepreneur will be excited about an £80k tax saving during his or her lifetime. Plus, the changes are unlikely to be any use to employees given the 5% holding requirement.”

The amendments to CGT are still not clear, leaving many asking - is this taper relief but only up to £1m? When Darling originally announced his plans to implement a single tax rate he faced a huge backlash because the proposals would penalise entrepreneurs.

Neil Pamplin was, “looking for a more orderly transition, say a two-year window, to lock in 10%. It’s very unfortunate that it has taken this long to announce, it leaves a very short timescale now for anyone to sell and lock in 10%. There has been huge uncertainty about what small businesses’ tax would be and this has made planning for the future very difficult.”

This ‘entrepreneur relief’ will provide a 10% tax rate for up to £1m of gains and will mean that any gains in excess of this lifetime limit will result in individuals paying the standard 18% rate of tax.

“Despite its shortcomings, it is something but I would like to understand where the cost of £200m is derived from in the context of the SME market,” said Neil.