The proposals are a key element in Large Business Taxation: The Government’s Strategy and Corporate Tax Reforms published by the Treasury today.
Announcing the new initiative, Brown said he had set himself the target of creating a new Britain based on ‘enterprise for all’, building on factors that made the UK a hub for global business including sophisticated financial markets and strong trading links worldwide.
He said: ‘To ensure this remains the case, it is essential that the corporate tax system keeps pace with changes in the global business environment.’
The move is expected to have a big impact on the share prices of some medium-seized and larger British companies.
Brown said this consultation would ‘focus on the a new relief for corporate capital gains to facilitate the progress of restructuring and reinvestment, helping business to take advantage of emerging global opportunities.
‘This is another essential step towards a more modern, more flexible and efficient tax system that will provide the stability that business needs to invest for the future.’
The document makes it plain that the government is committed to keeping taxes on business as low as possible and explains how a capital gains exemption for companies’ substantial shareholdings might work if introduced as part of the UK tax system.
It also explains how a parallel exemption for dividends might work, but sets out connected problems and concludes that a credit approach may be better.
But the government does not plan to restrict interest deductibility as part of the capital gains reform.
Brown also announced a review by the Inland Revenue of the coverage and effectiveness of links with business on administrative matters, focusing on feedback channels from larger businesses into the operational policy making process.
Responses to the capital gains reform must be filed with the Inland Revenue by 1 October.
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