TaxCorporate TaxE&Y pans Darling’s CGT explanation

E&Y pans Darling's CGT explanation

Big Four firm strikes a blow against the chancellor's justification for a capital gains clampdown, following Darling's grilling by a Treasury Select Committee

Tax experts at Ernst & Young have panned Alistair Darling’s reasoning for
not consulting businesses before imposing his controversial CGT reforms.

The chancellor faced intense questioning at a Treasury Select Committee
meeting yesterday in which he said that the taper relief withdrawal was simply a
change in the tax rate, not a change in the tax system.

E&
Y’s
tax boss Chris Sanger said: ‘The abolition in the taper represents a
significant change in the tax base, in that it moves from distinguishing between
business and non-business assets, and therefore it is hard to see how this can
represent merely a change in rate. Under the government’s approach, there would
therefore be a strong case for consultation over these proposals.’

Sanger added: ‘The Treasury Select Committee was also surprised by the
theoretical cash cost of taper relief, which has been estimated by the
government for this year to be £6.3bn. At first glance, this seems high,
particularly when compared to the cost when taper was first introduced in 1998,
when it was estimated to cost only £70m for business assets.’

‘However, this only represents the theoretic extra revenue that would have
been received if those same gains had been made if the tax rate was 40%. Hence
this theoretical figure does not represent the tax that would actually have been
received by the Exchequer if the taper had not been introduced.

Further reading:

Darling
seen to soften stance on CGT changes

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