Business reaction to the Pre-Budget Report

Reaction to Alistair Darling's first Pre-Budget Report has been mixed, to put it mildly. Alongside the much publicised changes to the Inheritance Tax regime, the Government has abolished taper relief (thus raising the effective CGT rate to 18%).

Here are some comments from the leading small business voices:

Institute of Directors (Miles Templeman)

"The single 18% CGT rate will be simpler than the current system, but it will mean higher tax bills for some. Long-term investment will be penalised by the taxation of inflationary gains, giving an effective tax rate on real gains that will be significantly higher than 18%. It is striking that this proposal is projected to increase tax revenue by £350m in 2008/09, then £750m and £900m in the following two years. This is yet another unwelcome tax hit on business."

Federation of Small Businesses

"Changes to capital gains tax will hit many of the UK’s 4.5 million small businesses directly in the pocket. This comes as a big disappointment to small businesses still reeling from increases in corporation tax announced in the last Budget."

Confederation of British Industry (John Cridland)

“Changing Capital Gains Tax rate to a flat rate of 18% will adversely affect the balance between risk and reward, both for entrepreneurs and for the UK's vital private equity industry. This move is disappointing and may lead to a reduction in investment in start-up and growing businesses.”

PKF Accountants (Peter Penneycard)

"Given that Gordon Brown introduced Capital Gains Tax taper relief, it is clear that the new Chancellor was determined to make his own mark by removing an element of his predecessor’s tax regime which had caused significant complexities and distortions of commercial decisions.”

Ernst & Young (Chris Sanger)

"It is a pragmatic move by the Chancellor which fits very strongly with his declared aim of simplification, and at the same time may not be so onerous as to deter private equity firms from basing themselves in the UK. It is notable that in the Treasury Select Committee hearings earlier this year, evidence was heard that the private equity industry could live with a tax rate of 15 – 20 per cent."

"Further, by abolishing the taper, he has also removed the complex calculations necessary to keep on the right side of the Revenue."

"But it appears that he has also given some relief to individuals facing capital gains tax bills on personally owned assets, such as second homes. Previously the best rate they could have faced was 24%, so now they will be better off."