PBR(6): U-turn expected on capital gains tax

The Government is planning a U-turn on proposals for a single 18 per cent rate of capital gains tax, by giving £100,000 in tax relief for small businesses who sell up and retire, according to an article in the Times.

Small business groups, including the Federation of Small Businesses and the Forum for Private Business, joined forces with the CBI and the Institute of Directors, to lobby the Government against the measure.

It means that business owners who would have faced a near-doubling in the tax they pay on selling their assets – from 10 per cent to 18 per cent – will now pay far less.

The Times says that under the plans, Chancellor Alistair Darling is to bring back a system of 'retirement relief' to owners of small and medium-sized businesses who sell up and retire. There will be a sum – possibly as high as £100,000 – that would be exempt from tax on sale.

Stephen Alambritis, of the Federation of Small Businesses, said: "It will be of great help to those entrepreneurs who have spent 20 to 30 years building up their businesses and have suddenly found their retirement plans thrown up in the air."

The Chancellor is also said to be considering further changes to help entrepreneurs. One option is tax breaks for people selling businesses rather than those just retiring.

The changes, announced in the recent Pre Budget Report (PBR) were aimed mainly at catching private equity groups who took advantage of the low rates when selling assets.

However, there was much criticism that the measures would also affect small businesses. Now, according to The Times, Mr Darling is acting to safeguard people who were not apparently the intended targets of the changes.