To sell or not to sell

Has New Labour changed its spots with the departure of Tony Blair and reverted to Old Labour under Gordon Brown?

One might think so, after the government proposed raising the rate of capital gains tax from the current 10 per cent to 18 per cent from next April.

Entrepreneurs across the UK are aghast, arguing more fruits of their labours will simply be hoovered up by the tax man. One can understand their concerns.

Certainly some independent pub owners plan to sell up between now and April 5, in order to circumvent the new regime, although such legislative knee-jerking reminds me of those who piled into the housing market after Norman Lamont's infamous announcement viz the abolition of double tax relief on mortgages at the end of the 1980s, which had disastrous results for many homeowners.

But aside from the accusations of 'tax and spend' that have been levelled at Labour over the years, does the proposed CGT hike justify all the fuss?

I was intrigued by comments from tax experts last week. While arguing for a simple and uncomplicated tax regime, it was pointed out that up until 1998 CGT had effectively been levied at 40 per cent whatever one's circumstances, before being lowered to the current 10p in the pound. Investment wouldn't necessarily suffer from a rise now, they said.

Yes, an 18 per cent CGT rate is a burden.

But as one specialist told me, however painful it is, it's a lot better than paying the 40 per cent of old.

Our tuppence worth is: the government should allow the first £100,000 of gain on a business sale to be tax-free, with a sliding scale of tax up to, say, £1m.

Not perfect, I'll agree, but the pain to entrepreneurs, the seedbed of the British economy, would at least be minimised.