Friday January 25, 11:49 AM
Chancellor revises tax reforms
By Kate O'Raghallaigh
Chancellor of the Exchequer Alistair Darling has revised the proposed reforms of Capital Gains Tax (CGT) announced in the last Pre-budget Report (PBR).
The reforms to CGT, which were outlined in Darlings PBR last October, included getting
rid of indexation, tapering relief and variable CGT, and introducing a flat rate tax of 18%. While the Chancellor has announced that he still intends to introduce the rate, he will also implement a new entrepreneurs’ tax relief allowance. This new lifetime allowance will charge a 10% tax on capital gains of up to £1 million. To qualify for the allowance, the investor must have a material shareholding of at least 5% of the voting rights of a company as well as being an employee or director.
The Chancellor’s original plan raised serious issues for investors in private and AIM-listed companies since the replacement of the accelerated taper relief currently available to investors in unlisted companies would mean that, instead of paying an anticipated 10% tax rate on disposal after three years, this would soar to 18%. The measure would have hit owner entrepreneurs in particular,” Jason Hollands of F&C Investments said.
However, discussing the plans to maintain the flat rate for all other circumstances, David Austin, managing director of property consultancy Property for Life, said: The Chancellors decision to go ahead with the flat rate of 18% capital gains tax is very welcome news for property investors of all levels of experience. The private rented sector plays a vital role in the property market, so it is important that tax conditions for landlords are favourable. The news will come as a timely relief for property investors in the current market, increasing confidence and allowing greater flexibility to manage their portfolios.
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