Piecemeal tax changes

Although welcoming the Chancellor's announcement to introduce the ‘entrepreneurs' relief' for capital gains tax, the Association of Accounting Technicians (AAT), the UK's leading professional education and membership body for accounting staff, is concerned that the proposals are knee-jerk and not thoroughly thought through.

"What this policy development seems to lack is long-term consideration," explained the AAT's Director of Professional Development, Adam Harper. "All these changes have been introduced on a piecemeal basis, driven as much by expediency as by a desire for reform."

"Even with the relief that has been announced for some business owners and shareholders in family companies, the single rate of capital gains tax, and the abolition of indexation and taper reliefs, will be to the detriment of many small business owners who will have to pay more tax on the sale of their businesses."

Harper continued: "Ironically, the Chancellor introduced the 18% limit as a simplifying and reforming measure but this latest change brings its own complications. Indeed, those with long enough memories will remember some of the difficulties encountered during the phasing out of retirement relief, which the then much-heralded taper relief was introduced to replace"

Under the ‘entrepreneurs relief' the first £1 million of relevant gains (cumulative for each individual) will be taxed at a rate of 10 per cent. Any excess will be taxed at 18 per cent. Entrepreneurs, for this relief, are to include sole traders and partners selling their business, or an interest in a business. The relief also applies to those who have been employees or directors selling shares in a trading company as long as they hold more than 5 per cent of the shares and are able to exercise 5 per cent of the voting rights in the company.

Small businesses concerned by the changes are advised to seek the advice of a qualified, regulated accounting professional. The AAT has over 2,500 members in practice across the UK that are licensed to provide accounting and taxation services to businesses and the public. There are already over 250,000 small businesses that employ an AAT member in practice to provide them with accounting, taxation and consultancy services.

To find an AAT member in your area, please visit: http://www.aat.org.uk/members/directory/

Alternatively, please call 0845 863 0788 or email: membersinpractice@aat.org.uk