Capital Punishment

Article excerpt

Chair of FSB Wales Janet Jones explains why small businesses have most to lose from the Government's plans for a single rate of capital gains tax THE FSB was quick to voice its anger following Alistair Darling's first Pre-Budget Report (PBR) in October. The FSB made it clear that this wielded another blow against the small business owner, and was likened to using a sledgehammer to crack a nut.

Capital gains tax (CGT) is to be increased from 10% to 18%. Small business is suffering. Again.

This was a standardisation move from the Government in what can only loosely be called an attempt at closing the private equity loophole.

And yet, for some unfathomable reason, the army of experts at the Treasury had failed catastrophically to devise a system whereby the real targets, the private equity players, were made to pay their share.

This is despite having carried out a six-month review of the tax treatment of private equity groups. Instead, yet again, the small business owner has to bear the brunt for the few big players at the top.

What does this mean in everyday terms? Well, the implications are many, not least that if you sell up you will lose 18% of the proceeds - a direct enough consequence by anyone's standard. The family-run businesses lose out after years of hard work.

The FSB has heard of many cases in which small business owners are now looking to sell up before the changes come into effect.

These include a motor garage owner who has run his business for 21 years and who wanted to sell up and use the proceeds as a pension. Yet accountants have informed him that, if the sale goes through after April 2008, he will incur an additional capital tax liability of pounds 42,000.

Once again, the Government has failed to realise the full implications of its diktats.

In essence, the new rate still leaves relatively unscathed the elite of multi-millionaires, compared with the hard-working small business owner. But not just that. Anyone who invests in small businesses will also be hit, and the move consequently threatens those who invest start-up capital for small businesses and budding entrepreneurs. …