The CGT changes in the pre pudget, applying from April 2008, are really quite nasty. Two features to note:
– there is now no relief at all for inflation. Prior to the Blair administration coming into office, all gains, both personal and corporate, business and investment, received indexation relief to increase the base cost of an asset for movements in RPI. Then Brown introduced, as Chancellor, Taper Relief for individuals. Companies continued (and still will post April 2008 as far as the PBR suggests) to receive indexation, but individuals got taper – and taper was a different beast in so far as it tapered down a gain rather than uplifted base costs. Over successive years taper was increased significantly to become, for business assets, a very generous relief. Business assets had a increasingly wide definition, and, for example, now cover an investment property owned by an individual and let to a unconnected business.
– there is now no relief at all for disposal of business assets on retirement. Prior to the introduction of taper relief, retirement relief existed exempting a large part of the gains arising on the sale of a small business on retirement. Taper relief being introduced saw retirement relief abolished, pushing retirement tax costs up for some small business owners but reducing CGT costs for owners of larger businesses on retirement – or indeed on a sale of an asset other than at retirement.
Taper Relief has (had) been described variously as “the biggest single risk to Tax Advisers PI Insurance for years” and “the most generous tax exemption for years” – there is no denying it was generous for business assets, but complicated as well. But the pendulum has well and truly swung the other way, and we now have a CGT regime that is a lot less generous that when Gordon Brown arrived as Chancellor.
Happily there is six months to plan for these changes, and these will be a major item in accountants in-trays over coming months.