Capital Gains Tax Share Scheme Criticism

The Treasury Select Committee has joined the chorus of criticism lambasting the proposed changes to the Capital Gains Tax system announced in the Chancellor’s pre-Budget report (PBR).

John McFall, chairman of the Committee, which released its report on the PBR today, said:

Tax simplification is a desirable objective, but the reforms of capital gains tax will have an immediate impact on many individuals and businesses that have sought to plan ahead. There is a window of opportunity for meaningful consultation between now and the 2008 Budget, and the Treasury needs to establish clearly the terms for such consultation

The report has been welcomed by the Federation of Small Businesses which has consistently argued that the introduction of a flat rate of 18% in place of taper relief will do harm to small businesses and entrepreneurship in Britain.

The proposed changes could also have a negative impact on a significant number of people saving in employee share ownership schemes. 

Fiona Downes at ifs ProShare, the not for profit that promotes employee share ownership, said:

ifs ProShare has stated from the outset that only a minority of employee share holders are likely to be affected by these changes but that this minority is ‘significant’. Our subsequent research confirmed that approximately 16% of those in an SAYE Sharesave scheme could be affected, which amounts to over 270,000 people.

It remains to be seen what further concessions Gordon Brown and Alistair Darling will make in the face of sustained criticism of their CGT plans.