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In the Pre-Budget Report in October 2007, the Chancellor announced a series of changes to the Capital Gains Tax (CGT) regime for individuals and trustees. These changes included the abolition of taper relief and indexation relief and the introduction of a single rate of CGT at 18%. The changes take effect from April 2008.
On 24th January 2008, in response to pressure from the business community, the Chancellor announced a new “Entrepreneurs’ Relief” . The first £1m of gains qualifying for relief will be charged at an effective rate of 10%. Gains in excess of £1m will be charged at 18%. An individual will be able to make more than one claim for relief, up to a lifetime total of £1m of gains.
The rules:
- There will be no minimum age limit;
- Relief will be available where the relevant conditions are met for a period of one year;
The Relief will apply to gains arising on the disposal of:
- The whole, or part, of a trading business that is carried on by the individual, either alone or in partnership, and
- Shares in a trading company, or holding company of a trading group, provided that the individual owns broadly a 5% shareholding and has been an officer or employee of the company.
Comment: For smaller businesses, there is no real change from before. For businesses worth in excess of £1m, unfortunately, there is likely to be a higher Capital Gains Tax liability on any disposal of a business.
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