As expected the Chancellor has bowed to the small business lobby and offered a reduced CGT charge for gains realised on the disposal of certain businesses after 5 April 2008
- details are highlighted below. All the other declared changes to CGT are to go ahead. They will affect the tax charge on all disposals after 5 April 2008. There will be winners and losers in the process!
In a nutshell indexation and taper relief will no longer be available from 6 April 2008. All gains, with the exception of the gains on disposal of certain business assets, will be taxable at a flat rate of 18%. If you own assets which have appreciated in value since purchase you should certainly take a look at the possible opportunities to utilise the existing indexation and taper relief before 6 April 2008.
In laymans terms there is a short window of opportunity in which you may ‘bank’ indexation allowance which you are now entitled to but which will disappear in April. If you or your spouse own shares or property which you have owned since before 1998, you should discuss the opportunities with us as soon as possible. The clock is now ticking!
Entrepreneur Relief - The Revenue have called the reduced rate which will be applied to gains on disposal of certain businesses, as Entrepreneur Relief. The basic details are:
The first £1m of qualifying gains will be subject to tax at a flat rate of 10%. Gains in excess of £1m will be taxed at 18%.
The £1m is a lifetime limit. So it will be possible for an individual to make a series of qualifying gains at the 10% rate as long as the cumulative total does not exceed £1m, and the other conditions are met.
The new relief is based on the broad principles of the now extinct Retirement Relief. Unlike Retirement Relief the new rules will be simpler - there will be no minimum age limit, and taxpayers will qualify if the relevant conditions are met for just one year. (The qualifying period for Retirement Relief was 10 years.)
