Darling Says CGT Reform Will Be Reviewed

Chancellor of the Exchequer and head of the UK Treasury Alistair Darling has today announced that the proposals for Capital Gains Tax reform which had been mentioned in his pre-budget report would not be finalised until April next year with the announcement of the official budget, and would be considered on its merits in the interim, thus fending off critics of the proposed changes.

The move today comes amidst growing criticism from investors, most of whom would be hit badly by the changes to Capital Gains Tax law if they were to be enacted as proposed back in October. The reform, if passed, would see capital gains charged at 18% on a flat rate system, as opposed to the current system which is significantly more complicated.

At present, business assets are charged on disposal where a gain arises from the selling price less the cost of acquisition. However the issue is somewhat complicated by the introduction of indexation allowance for periods of ownership prior to 1998 and business asset taper relief for periods subsequent to that.

As a result capital gains are often subject to complex calculations in order to determine whether there was in fact a gain taking into account inflation, and could leave investors savvy to tax implications with a mere 10% liability.

However the hotly debated changes which are expected to be introduced in April would impose a standard 18% rate of tax, making the process much more straightforward for the taxpayer to calculate.

Representatives from business groups have been critical of the proposals, claiming they will stifle risk taking, a crucial factor in the success and health of the UK economy. However it is thought that the annual exemption of just over £9,000 will remain for all individuals following the change, allowing a substantial initial tax break for those subject to any charge.

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