PracticeConsultingBudget ignores companies’ organic growth

Budget ignores companies' organic growth

Concerns are growing that the chancellor has not done enough to encourage organic growth within companies after announcing new proposals for deferred relief on substantial share holdings.

The government wants to offer relief on gains made on the disposal of substantial share holdings if they are reinvested in another company.

Gordon Brown announced in his Budget today that consultation would continue on the matter with a view to bringing in new regulations by 2002.

But there are new proposals that a substantial shareholding would only have to be a 20% stake instead of 30%, and would only need to be held for 12 months instead of two years.

Fears are that the measure will over encourage growth through acquisition without a comparable measure to promote organic growth.

Chas Roy-Chowdhury, head of taxation at the ACCA, said: ‘There should be a twin track approach offering the same relief for organic growth.’

A launch date of 2002 is also worrying tax managers because companies are known to have begun holding back on investment in the hope of the deferrel relief coming through.

The government however, sees the measures as making it easier to invest in business by offering more flexible terms.

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