The chancellor can turn the furore over capital gains tax (CGT) reforms into a ‘chorus of approval by boosting entrepreneurship and investment’, it has been claimed.
Extending the Enterprise Investment scheme (EIS) from next April to allow start-ups to qualify for CGT relief would be a clear sign that Darling wants to simplify the tax system and reward investment, according to Peter Penneycard, tax partner at PKF.
He said the EIS extension would restore the chancellor’s credibility as a supporter of small business without triggering an immediate tax cost to the treasury, as large firms would remain exempt from the relief.
“The current rules are illogical as anyone who owns more than 30% of a company or is actively involved in its management is denied relief from CGT while passive investors do not pay tax on EIS share gains,” added Penneycard.
"When he announces the final shape of the new CGT regime in the next three weeks, the chancellor has the opportunity to rebuild some of the business confidence that has been so badly eroded by his Pre-Budget Report.”
The British Chambers of Commerce (BCC) said the chancellor’s comments yesterday on the unpopular CGT proposals disappointing.
“[Darling] has offered nothing substantive to those affected and we are extremely disappointed by the lack of action considering the business communities' united opposition,” said Sally Low, director of policy and external affairs at the BCC.
“These changes will only serve to damage the country's entrepreneurial spirit and raise serious questions over the government's commitment to its enterprise agenda.”
© Crimson Business Ltd. 2007
