Tony, you might want to read this:
CGT - selling business assets after 5 April 2008
The present position.
If you sell a business asset before 6 April 2008, that you have owned for more than 2 years and which qualified as a business asset throughout your ownership, the maximum tax you would pay on the sale as a higher rate tax payer is 10% of the chargeable gain.
The changed position from 6 April 2008
Under proposed changes to CGT if you sold the same asset after 5 April 2008 you would pay tax at a flat rate of 18%. (This flat rate will apply to all taxpayers whatever your earnings position for income tax.) The previous relief given for indexation of gains to 5 April 1998 and taper relief from that date, will cease to apply as from 6 April 2008. Thus, on the face of it, the increase in tax is 80%
The loss of indexation (inflation relief) which is still available on assets owned prior to 5 April 1998, will mean that the effective increase will be more than 80% and in some cases a lot more - particularly where assets were held at 31 March 1982 or before. See comments on non-business assets below.
You may have noticed in the national press the active lobbying by the CBI and other employer organisations to challenge this increase in tax, particularly to support the owners of small businesses who are now faced with a potential 80% increase in the tax they pay. When these organisations met with the Chancellor last month, he reaffirmed his intention to follow through with the changes to CGT. (See STOP PRESS announcement in the introduction for news about possible retirement relief provisions which may take some of the CGT sting out of 'retirement' business sales after 5 April 2008, particularly for small business owners.)
For the sake of clarity we have listed below assets that are presently defined as business assets, the list is not exhaustive but covers the main items:
Shareholdings in privately owned trading companies (including shares listed on AIM).
The goodwill associated with a businesses run by a sole trader or partnership.
Residential property let on a 'furnished holiday lets' basis.
Commercial property let to, or otherwise used by, privately owned trading organisations, including your own business.
We would strongly recommend that all clients holding business assets, especially those considering a disposal, contact us immediately to discuss the possibility of a formal review of their CGT position. It is likely that you will pay additional tax if you dispose of your business assets after 5 April 2008. There are a number of strategies that we can discuss. We only have until the end of the current tax year to implement appropriate changes - the window of opportunity will almost definitely close at midnight on 5 April 2008.
We should also stress that our comments, made in both the CGT articles today, are based on 'proposed' changes to the legislation announced on 9 October. Until we see the published, and enacted legislation any advice that we give to clients at this point will need to be varied as, and if, the situation changes.