The move cuts the CGT rate from the planned 18% to 10% on lifetime gains of up to 1 million pounds. However, a local CGT specialist warns that not everyone will benefit.
According to Cheryl Page, tax advisor at Ward Gethin solicitors, 'While this is certainly welcome, as small businesses can now plan for the future with a clear idea of their tax situation, not all business owners will benefit financially. There will be winners and losers under the new rules.'
In October 2007 the Chancellor gave second home owners cause for celebration when he announced plans to cut CGT to a flat rate of 18%, down from 40%. At the same time, however, he scrapped taper relief, which can result in rates as low as 10%, and indexation allowance - a real blow for business.
The new relief takes effect from 6 April 2008 and applies to cumulative gains made in connection with the disposal of a trading business, including certain disposals of shares in trading companies. The first 1 million pounds of gains will be charged at 10%, with a rate of 18% applying to gains over 1 million pounds. The relief will not apply to those selling second homes; from 6 April they will pay the 18% flat rate.
Cheryl Page comments: 'Following the Pre-Budget Report there was real concern from small business owners who had built up a business over a lifetime and hoped to sell their firms and realise the proceeds for retirement. The latest CGT changes are likely to benefit these people. The picture is not so clear for those who start, develop and sell several businesses in their lifetime. Neither does it offer a great deal for larger businesses. It pays to consider carefully how the new regime will affect your tax liability and to plan for the future. A definite down-side to this new relief is the fact that the Chancellor has further complicated a tax that most business people already find confusing.'
For individual advice contact Cheryl Page on 01553 660033.
This article aims to supply general information, but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead. However, no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek our specific advice.
