PBR 07: MacIntyre Hudson slams CGT changes

The chancellor’s CGT changes are just tax rises by another name, advisers
from MacIntyre Hudson have said.

Nigel May, Tax Principal at MacIntyre Hudson, said: ‘Although introduced as a
means of charging a fair rate of tax on private equity owners, the Chancellor’s
proposals will have no effect on those who pay no tax as non-residents, or on
non-domiciles who avoid tax on gains made overseas. Private equity executives
who avoid the current effective tax rate of 10% will continue to avoid the new
rate of 18%.

‘This measure will, however, have a significant impact on ordinary taxpayers
disposing of their business assets. By abolishing indexation allowance as well
as taper relief, taxpayers will lose the benefit of indexation of their base
cost between 1982 and 1998, a period during which the RPI more than doubled.
They will not only pay an increased tax rate of 18%, but where the asset was
owned before 1998 will pay this on a much larger gain, much of which simply
represents inflation.

‘The Treasury estimates the reform will yield £900m a year by 2010-11,
allowing for the fact that CGT is paid in arrears. Alistair Darling has
introduced a tax increase by another name.’

May said the IHT changes would not affect those who are already well advised.

‘The Chancellor has done some wonderful arithmetic here by adding together
two allowances that already exist, and passing it off as doubling the allowance.
Any married couple receiving advice about reducing their inheritance tax bill
would have been able to use both allowances by either passing on assets or using
a nil-rate discretionary trust on the death of the first spouse. This change
simply gives a rubber stamp to prevalent practice in IHT planning.’

The firm also said the Air Passenger Duty changes could harm the UK.

Patrick King, tax principal, said: ‘This decision may impact upon the UK’s
competitiveness, reducing the attraction of London as a hub for planes to stop
at en route to other destinations. Levying the charge on flights could make it
uneconomic for international flights to stop at Heathrow and pay the charge,
rather than Paris or Amsterdam.

‘Alistair Darling is not only copying Opposition plans but is proposing a
complete rewrite of a tax which Gordon Brown changed less than a year ago. He
does seem, however, to have learnt the lesson of the last reform by allowing a
long period before implementation for consultation with the industry.’

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