From April 2002, the Chancellor proposes to reduce the period for which assets must be held to qualify for the maximum rate of business asset taper relief.
Such a move would mainly benefit individuals with shareholdings in unquoted companies or quoted companies in which they worked.
But assets held between 1998 and 2000 would still be subject to the old relief which was not as favourable.
‘You have the anomaly that you have held the assets for less time but the tax position is better,’ said Paul Falvey, a tax partner at Grant Thornton.But Falvey said such anomalies would be too difficult too correct.’I suspect the government will ignore it – it will be too much trouble to sort out,’ he said.
Other inconsistencies involve assets that were considered to be ‘non-business’ in 1998 but were then reclassified in 2000 as business assets – gains need to be apportioned between the two periods for tax relief purposes.
This particularly affected employees with shareholdings in their own companies.
Other experts complained that there had been too many changes to the system.’We would have preferred one single change from April 2000 or April 1998 as this would make it simpler for business,’ said KPMG’s John Battersby.
‘We are getting different rules every two years,’ he said.
Deloitte & Touche said the changes would hit hard those assets which slip from being a business to a non-business asset.
The firm said simplification was necessary but would be difficult without hurting individual taxpayers or hitting the public purse.
‘The complexity of business assets relief is however still a huge disadvantage, it requires simplification,’ said Deloitte’s Richard Baldwin.
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