Chancellor Alistair Darling has been forced to make major concessions to his contentious Capital Gains Tax
reforms after a storm of protest from the business community, according to reports.
Following yesterday's meeting where members of the Treasury met with business leaders and representatives to thrash out an agreement to satisfy all sides, it is thought that the Chancellor will announce the abolishment of CGT taper relief from 1 April 2008 and instead set a single 18 percent rate.
Darling is also expected to announce that bills are to be halved on the first £750,000 of profits, a move being referred to as 'entrepreneur's relief' which is likely to appease risk-taking small businesses who have continually complained that the original reforms put forward last October were stunting business growth for fear of being stung with heavy CGT bills.
However, large equity stake holders are likely to be far from placated by Darling's announcement and have now staged a campaign to fight the changes to the tax system.
David Frost, Director General of the British Chambers of Commerce, comments: "It is clear that the Treasury understands business concerns that the proposed CGT changes announced last October affect entrepreneurs adversely. There are likely to be targeted measures aimed at certain groups but we are not expecting the fundamental approach to change.
"The proposed Capital Gains Tax reforms raise a significant amount of money. As things stand businesses will be paying an extra £900 million a year in tax and with the public finances under severe pressure we do not believe that the Treasury has much room to manoeuvre. The test will not be the number of initiatives that are announced to stimulate enterprise but by how much the £900 million is expected to fall too. We want a significant cut in the proposed tax, not just smoke and mirrors."
The delays in a final decision have already caused a degree of turbulence in the AIM markets but the Chancellor is expected to stand firm on his wish to 'simplify' the UK tax system.
A spokesperson from The Federation of Small Businesses said: "The Government is still wedded to the simplification measures. But we have proposed an 'entrepreneurs' relief' that would give 50 per cent tax relief on the first £750,000 of gain (defined as profit from selling a business).
"We've not got any nods or winks, but we think our proposal would resonate with a nation of small shopkeepers."
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