Well, what a surprise. Several hours after the chancellor announced the changes to the capital gains tax regime yesterday, a few very nasty details emerged.

The first startling discovery was that ‘entrepreneurs’ relief’ is in fact a misnomer. The 10% CGT rate turned out to be a lifetime allowance, an effective kick in the teeth for all serial entrepreneurs for whom a one-off £80,000 tax concession will not make a huge difference. They are more concerned about the 80% tax hike they will have to wear for all their hard work for the end of their days.

Secondly, this new two-tier system will require a whole raft of new anti tax avoidance legislation to be drawn up – so much for the supposed objectives of creating a simple system.

Thirdly, the government is striking out one of the chief incentives for retention of key staff. Any employee with less than 5% of the company they work for is ineligible for the Entrepreneurs’ Relief. Not many can lay claim to that level of stake-holding. The vast majority of employee shareholders will therefore face a near doubling of tax rates on share gains.

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Tags: capital gains tax, cgt, entrepreneurs

This entry was posted on Friday, January 25th, 2008 at 11:59 am and is filed under Business News, Tax Issues. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.