As part of the Labour government’s second term, Brown said he would cut the rate of CGT from 30% to 10% on business assets held for at least two years. He also announced that CGT on assets held for one year could be cut from 35% to 20% from April next year.
The chancellor, along with trade and industry minister Patricia Hewitt and education and skills secretary Estelle Morris, outlined the measures at a business breakfast at No 11 Downing Street.
He indicated that changes to CGT would produce a regime that is, overall, more favourable to enterprise than that of the US.
In addition to the changes to CGT, the government unveiled a review of DTI support for small business, a simplification of VAT accounting and better tax treatment for share options.
Meanwhile, the government also revealed a separate consultation document introducing a voluntary flat rate VAT scheme for small firms with a turnover of under £100,000, which it claimed would mean ‘hundreds of thousands of small companies paying less tax and facing lower compliance costs’.
The scheme would remove the need for businesses to account internally for VAT because it would be calculated as a percentage of turnover. The Treasury also claimed it would stop levying automatic fines for late VAT payment.
The Chartered Institute of Taxation welcomed the chancellor’s proposals saying that any measures that reduce the tax burdens on business would only help.
CIOT president John Whiting, said: ‘It is pleasing to see that the ideas floated in the Budget, which we endorsed, for small business taxation are being taken forward, though there is a good deal of work to be done to make sure they deliver real tax and administrative savings.’
On share options, the existing Enterprise Management Incentive concession for businesses worth up to £15m could be extended to those worth up to £30m.
Other measures to help small business include the removal of automatic fines for late payment of VAT from firms with a turnover below £100,000 – fines would be levied only after a written communication offering help to sort out problems.
There would be a review designed to make payroll services more effective and less costly with better support and use of technology as well as a review of the DTI’s business support to report in September.
Earlier in the day, speaking on the BBC’s Today programme, Brown hinted that the policy of using results filed at Companies House for tax accounts, announced in the last Budget, would also be on the legislative programme.
Brown claimed Labour was bringing forward radical measures to tackle the productivity gap and create a true enterprise culture where the chance to start and succeed in business is ‘genuinely open to all’.
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