TaxCorporate TaxBrown denies £2bn tax loophole

Brown denies £2bn tax loophole

Chancellor Gordon Brown this week bullishly refuted claims he has created a £2bn tax loophole amid changes set to be made to the capital gains tax regime.

Speaking in the Commons Treasury Select Committee on Tuesday, the chancellor tackled challenges suggesting tax planners for wealthy individuals would encourage people to reclassify income as capital gains to slash their income tax liability.

However, Brown hit back stating current anti-avoidance measures would ensure a loophole was not created.

He added: ‘If there is evidence of any tax abuse, we will not hesitate to take further anti-avoidance measures to tackle the issue. We do not expect to lose revenues following the changes.’

Brown announced in the recent pre-Budget new tax breaks for employees and investors on gains they make from business assets such as shares in their own company.

The Treasury has costed the CGT changes at Pounds 10m rising to Pounds 40m by 2004/05. Critics suggested losses would come from individuals reclassifying income taxed at 40%, as capital gains, taxed at 10%.

Under the new rules, the CGT rate will fall to 20% after assets have been held for a year, and 10% after two years.

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