Capital Gains Tax Update
The Chancellor has bowed to the small business lobby and offered a reduced CGT charge for gains realised on the disposal of certain businesses after 5 April 2008 - details are highlighted below. All the other declared changes to CGT are to go ahead. They will affect the tax charge on all disposals after 5 April 2008. There will be winners and losers in the process.
In a nutshell indexation and taper relief will no longer be available from 6 April 2008. All gains, with the exception of the gains on disposal of certain business assets, will be taxable at a flat rate of 18%. If you own assets which have appreciated in value since purchase you should certainly take a look at the possible opportunities to utilise the existing indexation and taper relief before 6 April 2008. The clock is now ticking.
Entrepreneur Relief - The Revenue have called the reduced rate which will be applied to gains on disposal of certain businesses, as Entrepreneur Relief. The basic details are:
- The first £1m of qualifying gains will be subject to tax at a flat rate of 10%. Gains in excess of £1m will be taxed at 18%.
- The £1m is a lifetime limit. So it will be possible for an individual to make a series of qualifying gains at the 10% rate as long as the cumulative total does not exceed £1m, and the other conditions are met.
- The new relief is based on the broad principles of the now extinct Retirement Relief. Unlike Retirement Relief the new rules will be simpler - there will be no minimum age limit, and taxpayers will qualify if the relevant conditions are met for just one year. (The qualifying period for Retirement Relief was 10 years.)