Bowing to demands from business leaders and investors, Britain's chancellor of the exchequer, Alistair Darling (pictured), has announced concessions to the sweeping reforms that were planned for capital gains tax in the UK.
Billing the climb-down as "entrepreneurs' relief", Darling said the compromise will affect business owners when they sell their business. He said the relief would also be open to employees and company directors who own at least a 5% stake in a qualifying company.
The Treasury disclosed that the relief provides a 10% tax rate for up to the first £1 million (€1.3 million) of lifetime capital gains. Individuals can claim relief for gains made on multiple occasions up to a cumulative total of £1 million. Gains in excess of the £1 million lifetime limit will attract the standard 18% rate of tax. This cuts by about half the CGT rate on profits below the set limit.
"We estimate that around 80,000 business owners and investors will make disposals eligible for the entrepreneurs' relief," Darling told parliament, adding the changes would cost in the region of £200 million per year.
However, responding to the announcement in the Commons, shadow chancellor George Osborne dubbed the move a "humiliation" and a "retreat" from the chancellor's intended sweeping changes of CGT.
The measures will also apply to gains arising on disposals of trading businesses and to gains arising on certain disposals of shares in trading companies. Due to take effect from 6 April 2008, the concessions are part of the rest of the Treasury's capital gains tax reform package.