PwC partner moots transitional relief

There is a strong case for the introduction of transitional relief to placate businesses' worries about the proposed capital gains tax reforms, according to PricewaterhouseCoopers' Kevin Nicholson.

In an online briefing, Kevin, a partner at PWC, said that since last month's Pre-Budget Report 'there have been considerable concerns about the increase in tax burden on business owners and the impact it will have on the UK as “an enterprise economy”'.

He added: 'Whatever the pros and cons of the changes, it must be noted that this offers a genuine simplification of the tax system, with the introduction of a single tax rate and the sweeping away of taper relief (with its complexities and inconsistencies) and indexation.

'It also allows for a much simpler system for shareholdings in single companies.

'Entrepreneurs, small businesses, AIM investors and employee shareholders may all be adversely affected by the change in CGT rate, and will need to reconsider their tax position.

'However, perhaps the category most affected is the smaller business community, which has also seen increases in corporation tax rates and faced issues following the Arctic Systems case, etc.

'This group would undoubtedly be helped by a reintroduction of retirement relief. Such a route has been suggested as something that might need to be considered to “balance the package”.'

Kevin then remarked: 'There is a real argument for a transitional relief that would allow taxpayers affected to elect to have a notional sale and reacquisition at 5 April 2008.

'That ideally would allow them to crystallise a gain figure and tax bill that would be 'banked' (i.e. not actually paid).

'Realistically that is perhaps too much to hope for, so would a process which resulted in an actual tax bill at 5 April be seen as a fair option to both taxpayer (who at least has a choice) and HM Treasury/HM Revenue & Customs (who are not losing out completely with tax)?'

To read Kevin Nicholson's briefing in full, visit http://www.ukmediacentre.pwc.com/Content/Detail.asp?ReleaseID=2525&NewsAreaID=17

Categories: News , Arctic Systems , Jones v. Garnett , Capital Gains , Companies