TaxCorporate TaxApproval and concern at CGT changes

Approval and concern at CGT changes

Changes to capital gains tax are good news for business, but could prove detrimental to UK's workers, commentators from the Big Five have warned.

The chancellor’s announcement that capital gains tax taper relief will be reduced to 20% after one year on the disposal of business assets and cut further to 10% after two years will benefit businesses.

Steve Gilder, partner at PricewaterhouseCoopers, said the capital gains tax exemption could have major effects on shareholders and the shape of multinationals.

‘Corporations will be able to sell subsidiaries or divest non-core subsidiaries and invest in more productive business. It?s great news for GDP as it should mean that companies are more productive.

‘There will be lots of sellers and buyers out there by April 2002. It’ll be a major boost for corporate finance businesses,’ said Gilder.

But, Alastair Kendrick, director at Ernst & Young, warned of the implications to UK employees.

‘I?d be concerned about more movement in ownership of companies. It could result in lay-offs of workers given the announcements over the last couple of months. That may not help satisfy trade unions,’ said Kendrick.

Increased movement could involve businessmen buying up companies in the UK, asset stripping them, ultimately resulting in mass redundancies.

However there are opt-out clauses ? some companies will qualify while others, such as property investment companies, won’t, explained Gilder.

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