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Abolition of indexation and taper reliefs from capital gains
tax – what to do next
19 February 2008
As you will have seen, the Government has
announced that from 6 April 2008 both taper relief and indexation
relief from capital gains tax will be abolished for individuals,
trustees and partnerships.
The result is that in place of an effective
tax rate as low as 10% there will be a single flat rate of
18%.
In a fresh complication, a so-called
“entrepreneurs’ relief” will allow the first £1m of gains over a
lifetime to be subject to a 10% tax rate, provided that the gains
are on assets of a trade, or shares in a trading company held by
someone who has been an officer or employee of the company for at
least a year and who holds at least 5% of shares (and of the voting
rights) in the company; the details of this proposal have yet to be
published.
If you have assets that have benefited from
business assets taper relief – typically assets used in a trade,
premises let to a trading company, or shares or securities in an
unlisted trading company – or if you have assets acquired before
1998 and in respect of which substantial indexation relief has
accrued - you may want to consider “banking” taper relief, or
indexation relief, accrued to date by a disposal of your asset
prior to the change in law. In some cases indexation relief
can be “banked” simply and on a tax free basis – but professional
advice should be sought first as none of the solutions are free of
risk.
If you would like any advice from us on your
individual position, please call Andrew Noble of our Tax
team or your usual Browne Jacobson contact.
If you would like us to provide any
information to your regular tax adviser, for example with details
of deals you have done (and in particular assets such a loan notes
or earnout rights acquired on a company sale), or assistance in
putting in place any trust planning your regular adviser may
recommend (and making sure it ties in with your overall estate
planning), please let us know.
For more information or advice, please contact Andrew Noble.
The content of this bulletin is provided for
the purposes of general interest and information. It contains only
brief summaries of aspects of the subject matter and does not
provide comprehensive statements of the law. It does not constitute
legal advice and does not provide a substitute for it.