Alistair Darling’s decision to scrap existing reliefs and create one flat rate of capital gains tax could lead to a flurry of business sales, according to tax experts and corporate financiers.
Even Nicholas Ferguson, chairman of
Under the previous regime shareholders in unlisted trading companies could claim the full relief after two years of holding shares. Now, all capital gains, made from the start of the next tax year on April 6, will be taxed at a flat rate of 18%.
Howard Leigh, managing director of
Anneli Collins, head of private equity tax at accountants
Some thought that there would be little difference, though, in the flow of deals.
Leigh added that some owners of businesses might try to crystallise the capital gain before the end of the tax year. “Twenty-two years ago capital gains tax went up from 30% to 40% and many tried to crystallise gains by selling their businesses to a shell company.”
However, he added that while people were looking at such measures, it was not clear whether they would meet strict legal criteria.
Leigh added that he did not expect a drop-off in deals after the end of the tax year. “If you miss the deadline, then 18% is not as high as all that. It still makes sense to sell up rather than take out dividends and be taxed on the income.”
KPMG’s Collins said that companies with major property holdings stood to benefit, as the CGT rate on property gains had fallen, even after the reliefs had been withdrawn. “Hotel and pub companies doing lots of deals will benefit,” he said.