Under proposals to modernise company tax law, the Treasury is looking at ditching the capital gains regime for companies, meaning that UK-based multinationals would no longer be exempt from paying tax on certain overseas subsidiaries.

Under the proposal, gains on capital assets would be taxed as income.

Property development companies could find themselves being taxed on unrealised gains. Under its proposed new regime, profits and losses would be taxed according to the amounts recognised in company accounts and based on market valuation - a measure which all property companies must adopt according to International Accounting Standards by 2005.

Analysts told the FT this would be the 'death knell' for the UK property industry