The investment industry will pile into the loophole created by the CGT changes, Mazars has suggested.

The change, which sees a rate of up to 40% swapped for a straight 18% rate, will mean huge opportunities for tax planning.

Partner Paul Willans said: 'This will be manna from heaven for the UK’s investment industry, who will seize this, perhaps unintended loophole, and will be creating low-risk investments that will be subject to CGT rather than income tax. Of course, capital based investments may not be suitable for widows and orphans, but the potential for halving the tax burden will make an element of volatility acceptable.'

'Of course, we have yet to see the full details, and that is where the devil is, but if there are no time eligibility requirements, then Mr Darling has given the investment industry the green light to move money from cash deposits paying up to 40% income tax to capital gains-generating investments that could generate tax-free returns of up to £9,200 a year from April 2008 and pay only 18% tax on the remainder.'

'In summary, unless the Treasury changes its initial proposal and guidance, canny investors need never pay more than 18% tax on their investment portfolios. Is this what Alistair intended?'

Further reading:

Business counts cost as Darling hijacks Tory ideas