Alistair Darling has announced a further and significant climbdown on his controversial capital gains tax (CGT) reforms. Entrepreneurs will now pay a 10% rate of tax on capital gains up to £1m.
But taper relief is still to be scrapped and the set rate of 18% will be in place for all capital gains when selling a business after the first £1m. The Federation of Small Businesses (FSB) has welcomed the changes - but warned that small businesses' trust in the Government has been damaged by the original proposals and the uncertainty
over revisions to them.
John Wright, FSB National Chairman, said: "The Chancellor said specifically today that he wanted to help small businesses facing big tax rises from April and that is very good news indeed.
"The 'entrepreneurs' relief' he announced today is close to the proposals we put forward at the end of last year. They will go some way to protecting entrepreneurship in the UK as well as benefiting small-business owners planning to pay for their retirement with the sale of their businesses."
These changes are good news for licensees selling a single pub, but multiple operators will be hit hard by the loss of taper relief.
Nick Bish, chief executive of the Association of Licensed Multiple Retailers (ALMR), said: "We're not happy, it's a significant change to the rules with no consultation at all - and bigger operators are going to suffer. The Chancellor's pitched the changes at an individual businessman seeking to retire and release his assets - and for them this is a significant concession. But for ALMR members, people that aspire to be serial entrepreneurs by selling up and then reinvesting, this makes little difference."
Darling has been heavily criticised for the changes that could, in some cases, equate to an 80% increase in tax for people selling businesses.