CGT reform to hit worker share schemes

Date: 28th January 2008

The changes to capital gains tax (CGT) payments announced last week could have unforeseen consequences for people who invest in the company they work for, it has emerged.

A large number of people in share ownership schemes could be in for shock, according to the Independent, because their investments will fall into the new CGT tax bracket of 18 per cent.

This is despite Alistair Darling's so-called Entrepeneur's Relief, which allows small business owners and sole traders to pay a reduced rate of ten per cent, as long as their profits do not exceed £1 million.

In his pre-Budget report last October, the chancellor proposed the replacement of CGT taper relief with a flat rate of 18 per cent.

"The replacement of the taper relief currently available to investors in companies [not listed on a stock exchange] would mean that instead of paying an anticipated ten per cent tax rate on disposal after three years, this would soar to 18 per cent," Jason Hollands of F&C Investments told the newspaper.

Mr Darling announced the new CGT system last week after the Treasury held 11th hour meetings with small business leaders.

TaxAssist Accountants focus their accountancy and tax skills specifically on small businesses and taxpayers in the UK.