Do we lose on Capital Gains Tax
Industry's view of changes to Capital Gains Tax
Bradford Telegraph And Argus
After the turbulence of the markets, the autumn General Election which never happened and a tumultuous party conference season, Alistair Darling’s pre-budget report was never going to be easy.
His pledge to slash the chief rate of corporation tax by 2p in the pound to 28 per cent by next year will have certainly found favour.
However the Chancellor has found himself in the position of coming under fire from both union and business leaders over his proposals, particularly those regarding capital gains tax which some have said will stifle the growth of new businesses.
Mr Darling’s plans mean that all capital gains will be subject to a flat rate charge of 18 per cent, replacing the old sliding scale which varied between ten and 40 per cent.
The move, however, has met with criticism from business leaders.
John Cridland, deputy director-general of the CBI, for example, described it as disappointing’ and warned that it “may lead to a reduction in investment in start-up and growing businesses”.
At a time when Bradford is in the middle of a £21.4 million programme to encourage a new generation of start-up firms, the prospect of increased taxation levels may be alarming to many.
However Steve Waud, Director of the Bradford based Business Enterprise Fund, which lends cash and provides support to small enterprises which might be turned down for a commercial loan, said he did not anticipate the measures having an adverse effect on those considering starting their own enterprise.
“For the vast majority of ordinary Joes like you and I this is not going to affect us unless we are planning to sell the business,” he said.
“I really do not think it will stifle entrepreneurialism or be detrimental to start-up businesses. The only people it will be detrimental to will be serial entrepreneurs who may find they have less money to start the next business when they sell up.”
Bradford accountancy firm Howarth Clarke Whitehill said the abolishment of so called Capital Gains Tax Taper Relief from April had effectively hung up the For Sale’ signs on hundreds of British businesses.
Peter Geldeard, tax partner at the firm, suggested a delay in the move for an additional 12 months would enable business owners who were thinking of selling to take their time with any deals.
“This would help to safeguard the jobs of people employed in those businesses and provide a reasonable window of opportunity to ensure business owners realised the full value of their lifetime’s work.”
His colleague Tim Parr, who is also a committee member with the West Yorkshire Society of Chartered Accountants, echoed his views saying: “Whether this first Pre Budget Report will be judged a success will totally depend on the delivery of the commitments promised by the Chancellor.
“Simplification of the tax system - and indeed an overhaul of much of the legislation currently burdening business - is to be welcomed but the real test will be the speed and actions taken to bring real change. Those changes are vital for maintaining British business and its future in global markets.”
Bradford Chamber’s President, Balbir Panesar, gave a mixed reaction and questioned whether the rises in the transport budget would result in any additional funding for Yorkshire.
He said: “The recent credit crunch and last week’s headlines over inheritance tax has inevitably led to these matters dominating the announcements.
“As such we feel a little disappointed - but not too surprised - that the event didn’t include more measures to either shore up the fortunes of business or take steps to weather the expected economic downturn.”
Yorkshire Bank’s director of economic research, Tom Vosa, speculated that the current state of the economy may mean that interest rate levels are likely to remain static until next Spring.
He said: “Given the strong growth environment already in the UK, it is hard to see how the change in the fiscal stance will encourage the MPC to any early cut in interest rates, we continue to believe that the Committee will wait until May 2008 before easing policy.
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