HM Treasury & Custom’s draft legislation on its capital gains tax is set to cause fury among business owners, after the government declined to make any allowance for loan notes or deferred gains.
Many entrepreneurs are understood to have sold their business in exchange for loan notes rather than cash.
Advisers had hoped that such loan notes or deferred gains would mean that business owners could opt for the current CGT regime, when the sale was made, rather than the forthcoming CGT regime, with an 80% higher rate in many circumstances.
The draft legislation makes clear that the notes will be taxed under the higher rate.
'There should be an election,' said Chas Roy-Chowdhury, head of taxation at ACCA, referring to the possibility of being able to choose which tax regime to opt for.
Accountants welcomed some decisions in the draft legislation, which they said would benefit business owners sitting on gains of less than £1m, which could qualify for the 10% relief rate, the Daily Telegraph reported.
Lisa Macpherson, PKF national tax director at accountants, warned the details of the relief had come too late for many business owners.
Further reading:
Lonmin bosses sell stake ahead of CGT change
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