How Will Capital Gains Tax Changes Affect Your Business?
After a long and heated
debate with business organisations the
Chancellor finally made a decision on the
changes to Capital Gains Tax (CGT); and
while the changes are not as bad as those
initially planned, they do still increase
the tax that many small and medium sized
businesses will need to pay.
CGT rules are
complicated, and with the forthcoming
changes you should seek professional advice
before making decisions that affect your
payment of it.
CGT applies when you
sell an asset and its value has gone up
since you purchased it. CGT also applies
when you sell your business (or a part of
it), as shares and goodwill (E.g.: The price
paid by a buyer to cover the loyal
customers, brand names or reputation of your
business).
The changes coming into
force in April 2008 mean that CGT changes
from having three different bands into a
single 18% rate. It also removes the
indexation allowances and taper relief, and
replaces them with a rate of 10% on gains up
to £1 million.
David Frost, Director General of the British Chambers of Commerce,
said: "It is welcome that the Government has
recognised the concerns we raised about the
damaging nature of the CGT reforms on small
business. Keeping the 10% rate on gains up
to £1 million will be a great relief for
many small business owners, allowing them to
gain from the risks they have taken over
their career.
"What can not be ignored however, is that the ultimate impact of
these changes is going to be a £700 million
tax take from business. It is also clear
that this has done nothing to simplify the
taxation system, the original stated aims of
the changes.
"At a time when the economy is facing a downturn the Government is
taking yet more money from business. The
Government should not have changed a Capital
Gains Tax system that was working well and
helped to foster an entrepreneurial spirit
in the UK."
For more information on taxation issues
visit our Accounting section.
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