The radical reform of capital gains tax announced in the pre-Budget report could cause a massive increase in tax avoidance schemes, advisers have predicted.

Experts said the 18% flat rate of CGT would prompt taxpayers to take advantage of any loopholes in the new, simplified regime.

‘People will be looking to devise schemes that disguise income as investment. With no more time limits on capital gains the possibility is there to classify short-term income as a capital gain and pay 18% rather than 40%. Anti-avoidance is in place, but there will be opportunities,’ said Bill Dodwell, head of tax policy at Deloitte.

Cat-and-mouse games between the taxman and taxpayers over avoidance schemes relating to the changes in capital gains tax may be the most daunting prospect of all for HM Revenue & Customs, as the government desperately defends the radical reforms.

A combination of business groups and trade unions have opposed the changes, while the Conservatives have pledged to oppose the changes in parliament.

A flurry of activity is expected over the next few months as wealthy investors work out whether or not to use up capital gains allowances that have built up over many years before the reliefs expire.

Owners of personal assets such as fine wine and paintings will see their tax rate drop after April, but business assets may be put on the market in order to benefit from the rules in place at the moment.

Small business owners might bring forward retirement to make the most of the value stored up in their businesses, and investors in venture capital trusts and enterprise investment schemes ­ two products that Gordon Brown gave tax breaks to ­ may also sell up, according to Richard Allen, director of tax research at tax consultancy Allenbridge.