The Federation of Small Businesses (FSB) has commissioned Ernst & Young’s Chris Sanger, the original architect of the capital gains tax (CGT) taper relief scheme, to deliver alternatives which would mitigate what it sees as the damage of chancellor Alistair Darling’s plan to scrap taper relief.

The FSB has submitted a comprehensive report to the chancellor, who is expected to make a statement on CGT this week. UK’s biggest business organisation argues the country’s entrepreneurial culture would be damaged and that small business owners planning to sell their businesses to pay for their retirement would see their tax bills rocket overnight.

The FSB has proposed a new Entrepreneurs’ Relief, which would apply to owner-managers of small businesses as well as business angels. The proposals would provide a 50% relief on capital gains up to a limit of £750,000, which equates to an effective tax rate of 9%; make it easy to identify who would qualify for the relief; encourage serial entrepreneurship and prevent entrepreneurs from leaving the UK, which could in turn increase the overall tax take from them; and simplify the CGT system in line with the Chancellor’s intentions.

Further reading:

Celebrating small business success

CBI warns Darling of tax 'rage' over CGT