A desperate bid has been made by the government to prevent a non-dom stampede from Britain’s shores, as small businesses were denied any further capital gains tax reliefs.

The Treasury went to the lengths of adding a 16 page letter from an American law firm which said that it expected the £30,000 non-dom levy could be offset against US federal tax after jittery Americans threatened to leave the UK.

Ernst & Young’s private client partner Andrew Tailby-Faulkes said that despite the positive noises, an element of doubt still lingered.

‘[The Treasury] is not saying it’s a done deal,’ said Tailby-Faulkes. ‘It seems like there has been a lot of behind-the-scenes negotiations going on with the Internal Revenue Service.’

Tailby-Faulkes described the non-dom changes as ‘extraordinary’. ‘We and many other stakeholders called for a delay in changing the rules because they are so complicated. We could have benefited from further consultation and refinement.’

Lenka Hennessy, tax director at Grant Thornton, added: ‘The chancellor has back-pedalled on the non-dom rules.’

By contrast, those expecting further CGT concessions were left out in the cold. A flat rate of 18% with a lifetime entrepreneurs’ relief of 10% on the first £1m of business gains will still go ahead, but it will still only apply to those with a 5% stake in the company.

Budget 08 Special Report