In a statement in the House of Commons this morning, the Chancellor of the Exchequer, Alistair Darling, brought relief to entrepreneurs threatened by changes to the capital gains tax regime, but still had no clarity to offer the offshore life industry.
British small businesses had faced disadvantage under the new flat-rate 18% CGT because of the removal of indexation and taper relief. Darling has now announced that with effect from 6 April, a 10% rate of CGT will apply to the first £1m a year of qualifying gains by an owner, officer or employee with more than a 5% stake in a business. He said the measure was in accordance with representations from the small business community, estimating that 80,000 investors could benefit in the next year, at a cost to the Government of £200m a year.
Shadow Chancellor George Osborne said that Darling had “dithered and delayed” for four months since the pre-Budget report before announcing a retreat on his “one big idea”. “It’s a textbook example of how not to write a textbook,” he added.
But despite acknowledging representations from the ABI and life companies, Darling has still made no firm commitment as to whether there will be similar concessions for offshore bonds. Describing the situation as a complex one with no clear answers, he said there were particular problems with one particular set of products but that it was not clear that solving those problems would not create other problems.
Asked whether there was any hope for the insurance industry to get an answer before the new regime is due to come into force in April, Darling said his officials would be speaking to the industry over the next few days but that he didn’t want to raise insurers’ hopes. “We will help if we can but it is not immediately obvious the problem can be easily resolved,” he said.
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