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With Alistair Darling expected to this week make an announcement on capital gains tax reform, the Federation of Small Businesses (FSB) has submitted an alternative plan.
The FSB, which aims to protect and promote the interests of the self-employed, said its proposal 'would mitigate the damage of the plan to scrap taper relief' in April 2008.
The trade body argued that under the Chancellor's expected changes, the country's entrepreneurial culture will be damaged and that small business owners planning to sell their concerns to pay for their retirement will see their tax bills 'rocket overnight'.
The FSB has proposed an 'Entrepreneurs' Relief', which would apply to owner-managers of small businesses.
Suggestions include:
- 50% relief on capital gains up to a limit of £750,000, which equates to an effective tax rate of 9%
- Make it easy to identify who would qualify for relief;
- Encourage serial entrepreneurship and prevent entrepreneurs from leaving the UK, which could in turn increase the overall tax take from them; and
- Simplify the capital gains tax system in line with the Chancellor's intentions.
FSB national chairman John Wright said: 'We're pleased the Chancellor has acknowledged the outrage in the small business community about the plans to abolish taper relief on CGT and welcome the opportunity to put forward some alternatives.
'Thousands of small business owners and investors in new business ideas would have suffered from the Chancellor's decision.'
He added: 'Our proposals… would protect small business owners that have worked hard over many years to build up a business and want to sell it to pay for their retirement.
'They would also ensure that the investment in new business ideas that underpins the future of the UK economy could be maintained.'
