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Proposed change in CGT Rate
Wednesday, 26th May 2010

The Conservative Liberal Democrat Coalition Agreement has now been published and it states “an intention to tax non-business capital gains at rates similar or close to those applied to income, with generous exemptions for entrepreneurial business activities”.

Details have not been given as to what amounts to entrepreneurial business activities or whether the generous exemptions referred to will be as ‘generous’ as the current regime. Gains on the disposal of business assets, e.g. shares in private trading companies, could therefore increase. The rules in force at the moment enable gains of up to £2m on the disposal of business assets to be taxed at an effective rate of 10%, provided certain conditions are met, and 18% thereafter.

However, it seems inevitable that CGT rates will increase to 40% (or even 50%) in respect of the following non business assets:

- Second homes
- Investment properties
- Investment company shareholdings
- Shares in quoted companies

This is an opportunity to review your assets as there are tax planning options available that could potentially enable you to save considerable CGT in the future.

Please contact a member of the tax team or your usual contact to consider whether any action should be taken prior to 22 June.


Derby
Clare Beachell
clare.beachell@smithcooper.co.uk


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