TaxPersonal TaxSmall firms fume over CGT ‘cover-up’

Small firms fume over CGT 'cover-up'

Government's abolition of retirement relief on CGT was not revealed in the Budget.

Small business leaders launched a stinging attack on chancellor Gordon Brown for hiding details of his March Budget in the finance bill published last week.

Brown was accused of duping businesses into believing the Budget had benefited long-term investment when the small print in the finance bill revealed new taxes had been imposed by the government.

The Federation of Small Businesses said it was dismayed Brown had chosen to slip into the finance bill the abolition of retirement relief on Capital Gains Tax.

‘The chancellor failed to mention in the Budget that he was abolishing retirement relief on CGT, said Stephen Alambritis, head of policy at the federation. ‘He only said that CGT would be cut to 10% on long-term gains. That measure met with loud cheers, but now we know that people who retire and previously paid no tax will now pay 10%.’

Mike Warburton, senior tax partner at Grant Thornton, said small business owners nearing retirement could embark on a frenzy of selling when they realised the combined effect of the two policy changes. ‘The phasing out of retirement relief and the introduction of new taper relief may encourage entrepreneurs in their fifties to sell out during this tax year,’ said Warburton.

Alambritis said the omission of tax changes in the Budget was part of a wider problem. ‘There is a circus that has developed round the Budget that draws in accountants and the media. Because so much of the meat of the Budget turns up in the finance bill it means businesses are misled about the effects of the government’s policies.’

The federation said it wanted to see a technical finance bill ‘pre-notified in advance of the Budget’.

Ian Barlow, head of tax at KPMG, said the decision to set out most of the Budget details in a series of regulations rather than in the bill itself would effectively prevent companies lobbying for changes.

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