Private equity groups and business angels were considering the impact of
sweeping changes to capital gains tax, while other businesses remained in the
dark following Alistair Darling’s first and hugely political pre-Budget report.
The most far-reaching change in the report was the u-turn on capital gains
tax, in which prime minister Gordon Brown’s taper relief system was ditched in
favour of a flat 18% rate.
Advisers said the move, clearly forced on the government by the need to
tackle the low rate of tax paid by private equity bosses, would be low enough to
ensure that the industry might not move abroad.
‘It is notable that in the Treasury select committee hearings earlier this
year, evidence was heard that the private equity industry could live with a tax
rate of 15-20%,’ said Chris Sanger of Ernst & Young.
Deloitte head of tax policy Bill Dodwell said buy-out houses and individuals
could actually benefit from the change, as there was no longer a holding period
required for assets to attract taper relief.
But there was no announcement on the foreign profits consultation,
disappointing big business.
Announcing a levy on non-doms almost identical to that outlined by the
Tories, and giveaways on inheritance tax that advisers immediately questioned,
the chancellor sought to nullify the poll boost the Conservatives earned from
their IHT changes and domicile moves.
Darling said he would double the IHT threshold for married couples. But many
such couples already use nil-rate trusts to double their allowances passing on
assets to children, meaning the giveaway, costed at £1bn per year in Treasury
documents, is unlikely to make many better off.
‘This change, although likely to grab headlines, is in practice only giving
to most people what they already have,’ said Carolyn Steppler, tax director at
KPMG in the UK.
The proposals on non-domiciles almost exactly mirror the Tory plans. Rather
than charge a £25,000 levy, the government will introduce a levy of £30,000. And
it will only apply once a non-dom has been in the country for more than seven
There was also a change to the residency rules, counting arrival and
departure days as days spent in the UK when applying the 90-day rule on
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UK-based non-doms have paid ten times more tax than the average taxpayer, raising concerns over the Brexit impact on non-dom contributions and therefore, the economy
A senior MP has questioned the impact of HMRC’s decision to undertake yet another radical overhaul of its internal structure
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