The government will offer a concession on capital gains tax for entrepreneurs selling their businesses following protests against the decision to scrap taper relief, it has been claimed.

The Treasury recently came under fire from small businesses for its decision to scrap capital gains tax taper relief, which currently allows many entrepreneurs to pay just 10% tax on profits on investments held for longer than two years, in favour of a flat rate of 18%.

For these entrepreneurs, the scrapping of taper relief in April 2008 (announced in the Pre-Budget Report) will increase the tax bill on the sale of their businesses by 80%, and many have criticised the government for failing to consult with businesses on this.

Protests from entrepreneurs have taken many forms, ranging from a group on social networking site Facebook, to a petition on the Downing Street website which has now drawn more than 15,000 signatures. Major business lobby groups have also united in their opposition to the move.

It has now been reported that the government plans to bow down to this pressure by offering tax relief to entrepreneurs when they sell up.

Although unconfirmed by the Treasury, it is expected that small business owners will be entitled to a CGT exemption on the first £100,000 they make on the sale of their business.

However, Richard Proctor, tax partner at Grant Thornton, believes this offers little consolation to entrepreneurs.

He commented: "The chancellor has moved to help the unintended victims of his CGT reforms, but with the relief rumoured to only be available on a one-off basis, this will do little to address the considerable hike in tax faced by serial entrepreneurs and multiple business owners from April next year."

Peter Penneycard, tax partner at accountants and business advisers PKF, added: “£100,000 may sound like a lot but in terms of retiring from a business, it’s nothing.

"By taking steps to address the relatively minor issue of the taxation of private equity profits – essentially a political move – the chancellor has angered the business community and hit one of Britain’s key economic strengths – small business entrepreneurship.”

© Crimson Business Ltd. 2007